US lawmakers asked Facebook to Halt Libra Launch
US lawmakers on Tuesday, July 2, asked Facebook to “immediately cease implementation plans” of its Libra cryptocurrency. Before it proceeds any further, the House Financial Services Committee, led by Democrat Maxine Waters, wants to examine the risks around cybersecurity, global financial markets and national security concerns, it said in a letter to Facebook.
“We write to request that Facebook and its partners immediately agree to a moratorium on any movement forward on Libra — its proposed cryptocurrency and Calibra — its proposed digital wallet,” the committee wrote. “It appears that these products may lend themselves to an entirely new global financial system that is based out of Switzerland and intends to rival US monetary currency and the dollar. This raises serious privacy, trading, national security and monetary policy concerns for not only Facebook’s over 2 billion users, but also for investors, consumers and the global economy.”
Partnership of US-based Companies
Libra will be overseen by the Libra Association, a body created by the various partners to serve as the “monetary authority” for the new currency. Strangely, for an association with mainly US-based companies involved, the body will have its HQ in Switzerland. For this project it may create the impression of corporate separation for these companies, but of course Switzerland’s well documented culture of extreme financial secrecy might have had a part to play in this decision too. Under the auspices of this association, Facebook will create Calibra, which effectively acts as the “wallet” where the Libra transactions will take place on Facebook’s networks.
Countries like China are already looking inward on how to create a digital currency that will cater for their digital transactions.
Conflict of Interest
Facebook is a global champion in two areas – building social networks (or buying rivals like WhatsApp or Instagram if they become threats to its revenue) and tax avoidance. It could also be argued that it is also a serial offender at overstating its audiences and abusing its vast tranches of data, but there are quite a few companies who also fit the bill there. With this track record, the creation of Libra will inevitably put it on a collision course with the various sovereign and international bodies whose goodwill or indifference are required for it to succeed.
Gateway to boycut Tax, Interest Rates
Libra won’t pay interest on its tokens, and they won’t be backed by deposit insurance.
According to Roy Jeans is CEO of Grey Scorpion, "To avoid confrontation with these bodies, Libra has been described as a “transactional” currency only. In other words, it will not attempt to rival the dollar or euro or be used as debt for example. However, with potentially millions of untraceable financial transactions crossing borders within the Calibra wallet, the inevitable questions about tax and privacy will arise.
"In China, the benefit of a cashless society, underpinned by the unique legally enforced conflation of public and private interests, ensures that the ruling party can record every financial transaction. Despite its fine words about reaching out to the 1.7 billion people on the planet who are “unbanked”, Facebook will create a system that will do the exact opposite to China’s. Libra will place itself outside of sovereign controls – albeit while paying lip service to various regional or local regulations.
"Unsurprisingly the global elite have already stirred. France’s Finance Minister Bruno le Maire has said that Libra “will be limited to transactions only.” His main concern is the central one of Libra in time becoming a sovereign currency equivalent, able to issue debt. His core argument, and the one that will galvanise the international community to act, is this: “The aspect of sovereignty must stay in the hands of states and not private companies.”
According to Frances Coppola Senior Contributor of Forbes, "From a financial perspective, Libra seems fairly harmless. Even if all 2bn of Facebook’s users adopted Libra for some transactions, and all 90m of its small businesses used Libra for purchases and sales, it is not going to pose a major threat to the financial system, let alone replace sovereign currencies. But Libra is in reality a vehicle for bringing about Facebook’s wider aim of becoming the standard setter for digital identity. And that is a much, much bigger issue. Facebook is the last organization on earth that should have anything to do with digital identity or standards setting. For that reason, Libra must be stopped."