Just a couple of weeks before Mark Zuckerberg, co-founder and CEO of the world’s most popular social network, was scheduled to appear before the United States Congress to answer questions about his cryptocurrency ambitions, he received disheartening news from some of the key partners in Project Libra. Payment processing giants such as Visa, MasterCard, PayPal, and Mercado Pago have decided to withdraw from the Libra Association Council, the organization tasked with governance and development of Project Libra’s underlying digital coin.
What is Libra?
As of October 2019, Project Libra mostly exists as a proposal to create a global payment processing system that will primarily serve users of the Facebook, Instagram and WhatsApp networks. The Libra token, along with a cryptocurrency wallet, are the intended pillars of the system, which would ostensibly enable payments, remittances, money transfers, and even investments. Even though Libra is being developed as a blockchain token, it will not be a pure cryptocurrency because it is planned to be centralized; moreover, it will operate as a “stablecoin,” meaning that its value would be pegged to the average exchange of major currencies such as the U.S. dollar, the euro, the pound sterling, and the yen.
There are various ways to interpret Facebook’s goals with Project Libra. On one hand, the prospect of a digital coin that reflect the value of major fiat currencies is certainly innovative; on the other hand, the Libra digital coin would be supported by a robust payment processing conglomerate. The prospective market is measured in billions of prospective users, and this is what attracted the likes of PayPal, Stripe, Visa, and MasterCard in the first place. Although no banks sought membership in the Libra Association after its white paper was published, financial non-profits such as Kiva and Women’s World Banking have expressed interest in making commitments to the project.
What are the Concerns?
On paper, Project Libra seems like a revolutionary idea with a potential to empower millions of people who lack access to traditional banking services. The only Libra prerequisite would be a Facebook, Instagram, or WhatsApp account; the range of benefits would be the ability to send and receive funds, exchange cryptocurrencies, make purchases, complete remittances, and more. The problem with Libra, and the most likely reason major providers of payment solutions have been abandoning the Libra Association, is that American lawmakers, regulators, and officials thus far believe that Facebook is not capable of abiding by “Know Your Customer” and anti-money laundering compliance measures.
Personal data privacy has been another area of concern related to Project Libra, and Facebook has a questionable track record in this regard. Even President Donald Trump has publicly commented on the matter; in July 2019, he posted a Twitter update stating that Facebook should obtain a banking charter if it intends to operate as a bank. Project Libra is also facing scrutiny in France, where regulators do not want to see a digital currency competing against the euro, and in Germany, where a Member of Parliament has stated that Facebook could easily become a shadow bank unless it is regulated.
