Facebook’s Libra descended quickly. It has since been washed away in storm water. Governments and regulators have taken what Mark Zuckerberg saw as a simple way for its users to send and receive money online to a whole new level. Some have seen an evil plan to take over the world, or at least an attempt to dominate global finance.
Some US lawmakers have expressed doubts about the Libra regulation project.
Others have told Facebook that they really shouldn’t be creating currencies. Some have even begun drafting bills that would outlaw reserve-backed digital currencies like Libra (and possibly Tether).
The response overseas has been nothing more than sympathetic.
Britain’s Information Commissioner recently expressed concern about a company like Facebook. We know that FB has suffered a number of data leaks that have added financial information about its users to the data.
The company already has all the information about its customer’s tastes, preferences and friends.
Commissioner Denham’s concern includes objections expressed by regulators in Canada, Australia and the European Union. The EU antitrust regulator has opened an investigation.
Recent reports suggest that the pushback is affecting. Some of the 28 members of the Libra Association are said to have reneged on their $10 million pledge to help establish the foundation that governs Libra.
It is possible that other partners will follow suit and the concern Libra has generated will destroy the project.
There is also the possibility that Facebook is just the wrong company to manage the digital currency. Facebook has enough power even without adding global financial controls. But it is also possible that the interest that Libra has generated from regulators is exactly what the cryptocurrency world needs.
Bitcoin began as a libertarian project, a way for people to transact free from political interference.
But that lack of oversight has given free rein to money-launderers, fraudsters and market-manipulators. FinCEN, the US Financial Crimes Enforcement Network, says it now receives 1,500 reports of suspicious activity related to cryptocurrency transactions every month.
The result of all that suspicious activity is that the public still doesn’t trust bitcoin in particular or cryptocurrency in general.
Currency investors understand that the value of the dollar or euro is a measure of the demand for those currencies in international trade. The value of the dollar increases when more enterprises are transacting in dollars.
But people don’t understand why the price of bitcoin suddenly rises or falls when very few actual purchases are made using the coin.
As long as it is realized that someone who knows more than themselves can profit in the market, they will stay away. And before they even begin to deal with the challenge of buying bitcoin, keeping it securely, and having the seller ready to accept it when they make a purchase.
For bitcoin purists, the idea that the cryptocurrency could benefit from government oversight is almost blasphemous.
But if bitcoin is to surpass speculators, early adopters and true believers, it needs stability and transparency. Regulation has its problems, but it can bring predictability.
Holders of currency can learn that their assets will still be around in a year and will not be devalued by a committee they do not understand. They will be able to transact using digital coins without being seen as money launderers or drug dealers. They will feel that there is something behind the coin.
Libra could come under strong enough attack to stop the project in its tracks.
One considers that the regulation and oversight that the project has left behind could create exactly the kind of infrastructure that other cryptocurrencies require.