The United States Congress has asked Facebook to halt the development of its Libra cryptocurrency until it has had time to investigate its potential impact on global financial stability.
Announced last month, Libra is a cryptocurrency with bold ambitions. Making use of its social media platform’s vast user base – which is believed to include more than a quarter of the world’s population – Facebook hopes to create a global currency that is easy to access and cheap to transfer funds around the world.
A letter signed by the Democratic heads of the house committee on financial services and its subcommittees said that the continued development of Facebook Libra could create a “new Swiss-based financial system that is too big to fail”.
“Because Facebook is already in the hands of over a quarter of the world’s population, it is imperative that Facebook and its partners immediately cease implementation plans until regulators and Congress have an opportunity to examine these issues and take action,” the letter reads.
However, according to Kerim Derhalli, CEO and founder of investment platform Invstr, Facebook will have planned for state interventions, and its ambitions are unlikely to change now that the pressure is on.
There have always been regulatory eyes on Facebook, especially so since the Cambridge Analytica scandal unfolded in early 2018. Lawmakers have challenged the social media giant on everything from fake news and election meddling, to data misuse, to the measures they take to protect young people from exposure to harmful content.
As a result, the company is more than used to dealing with lawmakers, and are unlikely to be too troubled by this call from Congress. If anything, the letter from Congress only serves to demonstrate Facebook’s position of power, with politicians asking, rather than telling, the company to halt development:
“Today’s plea from the US Congress demonstrates just how much state legislators are running scared of Facebook. The reality is that information and power is now in the hand of the tech companies, rather than politicians,” Derhalli said.
“While this is an obstacle for the development of Libra, if Facebook wants to deliver it then it’s likely that they will find a way.”
Facebook Libra’s 2020 launch may be too ambitious
Facebook is likely to find a way to achieve its crypto goals regardless, but the tech giant may have been slightly too ambitious setting itself the goal of a 2020 release.
Not only will Facebook have to contest against pressure from lawmakers (not just in the US but globally), but it will also face the challenge of navigating the particularly volatile cryptocurrency landscape.
“With Facebook making such a major move, one that could transform global finance, most commentators would say that the target is ambitious,” Derhalli said.
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As well as the concerns raised by Congress, there are many questions that Facebook needs to address before we will see Libra released to the public, notably, according to Derhalli, the potential tax flaws, as well as the cryptocurrency’s value against local currencies. Then there is the time that it will take to perfect the technology and test it before release. Setbacks, Derhalli believes, are likely.
“There is a long, rocky road ahead before we see Libra in the hands of the mass public.”
“But, this is Facebook. If anyone has the resource and lobbying power to launch in 2020, it’s them.”