The experiment that is Libra has just stumbled across yet another roadblock.
A board member of one of the most powerful fiscal authorities on Earth, the European Central Bank (ECB), tells reporters of Reuters that the Facebook-backed cryptocurrency will not — can not, rather — come to market until regulators are satisfied with what they are seeing.
“Either it Works or it Doesn’t”
At the recent G7 Summit in France, the board member, economist Benoit Coeure, remarked that until all of the countries there were satisfied with how Libra involves or doesn’t involve everything from money laundering to economic stability, it will be prevented from launching. He used the words “prolonged discussion” to describe this regulatory threat.
Expounding on why exactly regulators are taking such an approach, Coeure notes that for something as important as a new payment system that will be accessible by over two billion individuals in most of the world’s countries, everything needs to be “safe, robust, and resilient from day one”.
Indeed, U.S. Treasury Secretary Steven Mnuchin has warned that Libra — and cryptocurrencies in general — can be used in illicit activities, like the financing of terrorism, the sale of drugs and other contraband, and tax evasion. “Either it works or it doesn’t,” the ECB representative further quipped, boiling Libra down to binary.
Also, Coeure notes that since cryptocurrencies are a new topic on the global stage, there are inconsistencies and gaps in how nations address the asset class, implying that the eight-odd months from here to Libra’s planned launch may not be enough time for regulators.
Coeure didn’t address how exactly regulators would prevent Libra’s launch, but there have been rumors of a draft bill that would prevent Silicon Valley companies from making forays into financial services.
Per previous reports from Blockonomi, a leaked bill titled “Keep Bitcoin Tech Out of Finance Act“ would ban big names in technology from “establishing, maintaining, or operating a digital asset” that is meant to fulfill the three fundamental tenets of money: medium of exchange, unit of account, and store of value.
Also, an individual like the American President could theoretically sign an executive order that could prevent Facebook from moving ahead with the development of Libra and its wallet, Calibra. Seeing that Trump has tweeted about Libra’s potential violation of the Banking Charter, this is not as far fetched as it may initially sound. The President tweeted two weeks back:
Facebook Libra’s “virtual currency” will have little standing or dependability. If Facebook and other companies want to become a bank, they must seek a new Banking Charter and become subject to all Banking Regulations, just like other Banks, both National and International.
Let it Grow
While it has been clear that some of the most powerful men and women on Earth are against Libra’s launch, it is important to note that Libra has some allies, albeit relatively few.
The head of Germany’s central bank, Jens Weidman, told a group at the G7 conference that should Libra be released in the state that was outlined in the white paper, the end result may be “attractive to consumers”. He adds that it may be unwise to suppress innovation before true issues have arisen.
Also, U.S. Congressman Patrick McHenry, who represents North Carolina’s 10th District, remarked that Bitcoin and the ecosystem that surrounds it is an “unstoppable force”. Speaking to Congress and CNBC’s “Squawk Box” panel, the politician urged his peers to not try and “deter this innovation”, as “those that already have tried have already failed.”