Last Updated on
It was the year 2018 when Mark Zuckerberg announced that he is interested in the study of positive and negative aspects of cryptocurrencies.
One thing leads to another, and in late 2018, Facebook announced that they are going to launch their cryptocurrency project named “Libra.”
Instead of using existing blockchain technology, the project is planned to have its blockchain to be developed by special blockchain division.
The launch date of the Libra is scheduled in the year 2020.
As cryptocurrencies are decentralized in nature and they are not adequately regulated, it raises a lot of concerns for the governments. There are severe challenges in legalizing and making its use as easy as traditional currencies.
Since the day Libra is announced, there has been a lot of criticism being faced by it. The US government didn’t welcome the project and raised a lot of concerns.
The man criticism is based on the fact that in recent years, Facebook has been held responsible for data scandals, where Facebook was accused of using the user data illegally.
State authorities are concerned that since Facebook contains the user data of millions of users and when this data will be used in the Libra project, it could lead to several problems, like money laundering or other illicit activities.
Zuckerberg vs. Congress
Mark Zuckerberg was called to senate hearing, where he was asked all the hot questions related to concerns from the US lawmakers.
On one side, Mark was keen to regard Libra as a cryptocurrency that could potentially change the current digital cash system. On the other hand, the senators had a lot of concerns that Libra will be an unregulated cryptocurrency that could be a threat to complete financial systems and the economy.
Dropping out of Stable Partners
One of the significant advantages Libra had over recent cryptocurrency project was the backing up of big tech giants like PayPal, MasterCard, and Visa. A lot of multinational companies and non-profits showed their interest when the Libra project was announced.
But as the pressure from the US Government increased, the stable partners started to drop out. The first significant setback occurred when PayPal became the first partner to depart from the project, which was later followed by MasterCard and Visa.
When asked about the dropping out of such stable partners, Mark agreed that the project is risky. There has been a lot of scrutinies that led to this decision. It seems Mark wanted to suggest that the dropping out was the result of the pressure being exerted by the government that was too much to handle.
Major Concerns against Libra
The project is facing backlash not only in the US but worldwide. Countries like Italy, China, and Germany also raised their concerns against the project.
Let’s discuss the significant issues that the regulators have against the project.
Disrupting the Monetary System
One way or the other, the main concerns regarding the Libra project somehow associate with the fact that Facebook has a vast user base of over 2.4 Billion users that Facebook could potentially use to promote their project.
In contrast to major cryptocurrencies like Bitcoin, which are unstable, Libra will be a stablecoin backed up by real-world assets like dollars. If most of the user base of Facebook starts using the Libra coin, this could potentially disrupt the whole monetary system.
The Libra Association will be responsible for maintaining reserves of millions or billions of dollars. This is huge when it comes to capital markets, and when this money is moved around, it could potentially disrupt the whole global economic market.
It will be the first time that a private organization or a group of organizations will have so much power. This is one of the major fears that the governments have, as being a central authority, the monetary decisions are most likely to be made by central authorities and not by some private authorities.
Libra Association, however, is keen to make sure that all the rules and regulations are followed, and they won’t release the project unless it complies with all the laws that are needed to be followed.
“The Libra Association and its members are committed to working with applicable regulatory authorities to achieve a safe, transparent, and consumer-friendly implementation of the Libra Project.”
Head of Policy and Communication of Libra Project
Recent Controversies and Data Scandals
In the recent past, Facebook has faced a lot of controversies relating to how they used user data. The data scandals were so massive that it even affected the outcome of US presidential elections.
When it comes to combining the user base of Facebook with the project itself, Facebook could potentially use the user data for their project. Imagine a user’s interest, activities connected with his spending patterns.
When the Head of Libra Project David Marcus was asked this question, he said that he understands the issue and will have to make firm commitments so that people trust the project.
Who’s Winning and Who’s Losing
If we see the recent events, it’s clear that so far, Facebook is losing, and it might not be able to release the Libra Project in 2020 as planned. Even before its launch, some countries like France and Germany have agreed to block Libra.
Also, the backing out of big partners like PayPal became a significant concern for Facebook to defend the project. The members of the Libra association are also facing a lot of pressure to back out of the project.
The Future of Libra
Digital currencies are getting popular day by day. Developed countries are now looking forward to launching their digital currencies. The challenges will keep on increasing over time.
Lawmakers must regulate the use of currencies as it eventually helps the economy. Digital currencies are easy to use and an excellent way to let the unbanked population join the digital transaction system.
When it comes to Libra, there are a lot of issues and backlash that is currently being faced by the Libra Association. In the long run, it might help the Libra Association to make decisions that could potentially improve the project itself. Sooner or later, the project will be launched.
Only time will tell if all this scrutiny will eventually help the project, or it might ultimately threaten the very existence of Libra.