In June of this year, Facebook announced its plans to launch a cryptocurrency dubbed Libra. However, the company has since seen a backlash, with regulators and the media grilling the project for a variety of reasons. With this in mind, let’s explore at least five reasons why Libra may not launch – something that is considered entirely possible within the cryptocurrency community.
It didn’t take long for Facebook’s future cryptocurrency project to grab regulators’ attention. Unfortunately, much of that attention was rather negative.
The French finance minister and a German member of the European Parliament were among the first to react, calling for a discussion on Libra. Moreover, both countries agreed to block the project, stating that “no private entity can claim monetary power, which is inherent to the sovereignty of nations.”
Months later, the situation surrounding Libra has gotten worse, and it has brought attention to the cryptocurrency market as a whole. G20 members were urged to articulate their positions on the matter, as officials contended that Facebook’s project couldn’t respond to all regulatory challenges.
Losing Key Supporters
When it was first announced, the Libra Association had a total of 28 members. Powerhouses such as MasterCard, Visa, Spotify, and Uber were among the project’s initial backers. Unfortunately for Facebook, the negative stance of regulators across the globe cast doubt over the project’s future, and it subsequently lost important backers.
PayPal was the first major name to back out, and Visa, MasterCard, and eBay followed shortly thereafter. The payment processing company Stripe stepped back as well, and the Latin American payment system Mercado Pago was next.
Needless to say, losing key supporters puts a lot of pressure on the project, and even though Libra officials have said that they will continue working as planned, confidence in it is becoming notably weaker.
Scams, Frauds, Legal Issues
Being a social media giant, Facebook’s cryptocurrency brainchild brought notable attention to itself in other respects. Even though the official announcement specifically stated that Libra would launch no sooner than 2020, that didn’t stop scammers from taking advantage of consumers. Calibra.com is the project’s official website; however, Libra coins were purported to be sold to the public on another one.
More legal issues came from an Israeli insurance company with the same name – Libra. They sent a notice to the social media giant, claiming that they owned all rights associated with the “Libra” trademark. Facebook responded by saying that they owned them, and referred to a different trademark – “Libra Association”, which is a non-profit organization based in Switzerland and owned by Facebook.
It will be interesting to see how the case turns out, as it’s pretty obvious that the name of the cryptocurrency was intended to be Libra, not Libra Association.
One of the most important issues put forward by regulatory watchdogs regarding Libra’s mission was users’ safety and private data. And it’s safe to say that Facebook has a rich history of scandals, and it was even fined $5 billion following its privacy war with Washington.
Facebook’s CEO, Mark Zuckerberg, testified before Congress after the notorious Cambridge Analytica data leaks, and he even admitted that the “right” regulations might be needed. The European Union took a stand as well, creating the General Data Protection Regulation (GDPR).
It’s worth noting that Zuckerberg will testify before the U.S. House of Representatives regarding Libra today.
Structural Issues With the Cryptocurrency Itself
In addition to all of the above, Libra has some inherent structural issues in general.
Samson Mow, the CEO of Blockstream, pointed out that “Libra can’t be everything for everyone, and it can’t be both open and closed at the same time.”
His comments followed this statement from the Head of Libra, David Marcus:
“We open-sourced it, and as a result it doesn’t belong to us anymore. It now belongs to the community, and they will help build the code, and we will relinquish control over both the codebase and network through the process.”
This is in direct contradiction with another of Marcus’s statements, that “wallets will enforce the sanctions that are led by our national security apparatus and treasury.”
Marcus previously stated that people will be able to do whatever they want to with the money, as long as they have “legitimate use of the product.” Naturally, this means that the Libra Association could, in theory, decide that a certain use isn’t legitimate and freeze users’ funds or deplatform them entirely.
In other words, besides the regulatory pressure that Facebook is currently facing, it appears that the general concept of Libra needs a lot of work and polishing.
And if all of the above isn’t enough, Facebook itself recently warned its investors that Libra may never launch.