Facebook is entering the cryptocurrency market, hoping to beat bitcoin at its game. And if the government has anything to say about it, the tech firm might as well develop a stablecoin that will do exactly what bitcoin didn’t: become the standard in the global financial market.
After Facebook announced it would launch its cryptocurrency, Libra, Rep. Maxine Waters (D-CA) said the company should suspend plans to launch it until regulators can look at the digital coin more closely. As the head of the House Financial Services Committee, she wants the company to succumb to regulations before releasing its currency, claiming that the tech firm “is continuing its unchecked expansion and extending its reach into the lives of its users.”
Perhaps, Facebook already expected this treatment and as such, was quick to explain in its announcement that Libra would not be maintained by the firm but by a non-profit collective of companies.
According to the social media network, Libra will be backed by fiat currencies such as the U.S. Dollar, and it will be available to the tech giant’s 2.4 billion members as well as anyone with a smartphone.
The Libra Association, the firm stated, was founded by companies like Lyft, Uber, eBay, PayPal, Visa, Mastercard, and even Spotify. And according to Facebook, the stablecoin hopes to bring the financial system to the hands of the 1.7 billion individuals across the globe who do not have access to banks.
Considering that credit card companies are directly involved in this effort, it might be fair to say that Libra could be easily accepted as payment across the board. As such, lawmakers might be particularly concerned, as that would set Libra apart from bitcoin right off the bat.
“We need to go beyond the rumors and speculations and provide a forum to assess this project and its potential unprecedented impact on the global financial system,” Rep. Patrick McHenry (R-NC) said, supporting Waters’ call for regulation.
Sen. Sherrod Brown (D-OH) agreed, saying that “Facebook is already too big and too powerful,” why let it run its own currency as well?
Unsurprisingly, Facebook said in a statement that it was more than willing to respond to their questions.
From the company’s perspective, it is easier for it to cooperate and even suggest regulations than let the state develop rules on its own. After all, if Facebook doesn’t step up, other financial institutions will.
Will Libra Go Mainstream?
As explained by ZeroHedge, Libra isn’t “a cryptocurrency in the traditional sense.” For one, its supply will be dictated by a central authority.
Furthermore, the digital coin is backed by major players in the global financial industry, meaning that it enters the cryptocurrency game willing to compete with digital coins that exist precisely as a response to the banking system. In other words, Libra is a mainstream competitor to bitcoin and the like.
The fact that lawmakers were so quick to hit back shows that Washington is paying attention. And as explained by countless other news outlets, Libra is designed to be used in transactions, bringing the banking system to those without access to it — just the type of thing that would make the stablecoin a leader in the financial industry. But instead of going to competitors of the industry for help, Facebook tapped into a project run by giants such as Mastercard and Visa. This might be a sign that Libra won’t be regulated out of existence by Washington.
Still, there are risks that regulators will actually help Libra.
If Washington does work with Facebook and the Libra Association, it might set up a regulatory framework that could prevent other tech companies from creating their own digital currencies. That would ultimately benefit Libra, Facebook, and the major players behind the currency. The ones who would suffer would be the very digital currency users who are meant to benefit from Libra.
Facebook, as well as the other firms behind Libra, might be truly willing to provide a digital coin system that will help lift the world’s poorest. But if the government is involved in the process, it might just do the opposite, by stifling competition.
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