There have been doubts from the beginning and Facebook has so far been unable to take them away. The social network launched the plan for the libra in June this year. Next week CEO Mark Zuckerberg will defend the idea for a digital currency in front of the US Congress, but the launch seems farther away than ever.
Germany, France and Italy are working on measures to prohibit the arrival of the libra in Europe. “The libra is not welcome on European territory. We are taking measures with the Italians and the Germans because our sovereignty is at stake,” said the French finance minister yesterday. In the Netherlands too, the regulators look critically at the currency.
“We are watching the developments with some concerns,” the Dutch Central Bank (DNB), the Dutch Central Bank, told the NOS. “Supervisors and central banks should not want to thwart innovation, but we see a number of risks here. Think of money laundering, terrorist financing and circumventing sanctions legislation.”
“You can see the libra as the financial variant of Uber,” says Simon Lelieveldt, financial consultant. “They try to force something outside of normal regulation, but in a market with much stricter supervision than the taxi industry.”
Facebook has lost the support of a number of big names in a short time. Among other things, the PayPal payment service and Visa and Mastercard credit card companies withdrew support. Such companies have given the project legitimacy until now. Seven parties withdrew in total.
David Marcus, who is responsible for the project at Facebook, acknowledged that it is “not good news”, but at the same time said it would not be the end of the initiative. The company does take into account that the project is not ready for launch in 2020.
I would caution against reading the fate of Libra into this update. Of course, it’s not great news in the short term, but in a way it’s liberating. Stay tuned for more very soon. Change of this magnitude is hard. You know you’re on to something when so much pressure builds up.
— David Marcus (@davidmarcus) October 11, 2019
According to Rens van Tilburg, director of the Sustainable Finance Lab at Utrecht University, it is not so surprising that the major financial institutions have withdrawn their support. “Facebook is a very unfortunate figurehead for the libra.” In recent years the company has often been discredited, often due to privacy violations.
“And the more established parties slowly but surely found out. The fact that Facebook was going to do this, just created a lot of resistance.”
American politicians want to test Mark Zuckerberg about the libra next week. It is only the second time that the chief appears for a hearing, the first time because of the Cambridge Analytica scandal.
Meanwhile, the extra attention does not seem to fall well within Facebook. “People within Facebook’s senior management are wondering why a new crypto coin – including all the baggage that this entails – is needed to advance Facebook’s financial ambitions,” wrote The Wall Street Journal earlier this week.
“Facebook is unable or unwilling to explain how the libra is structured legally,” a source told. “With regard to money laundering risks, they make a dynamic impression. But we have to wait and see if that is really the case. Their intention is a bit foggy. We need much more information. We have not yet seen any good answers to our questions.”
The question is how it goes now. Zuckerberg will try to convince American politicians next week that it can work. Consultant Lelieveldt expects the CEO to point out that if Facebook does not come up with such an initiative, the competition will come from China and that they should therefore be happy with the idea.
Zuckerberg will also – just like earlier times – probably emphasize that the libra will only start in the US and Europe, if the regulators agree.
“Every coin that Facebook is in charge of, will hardly be viable,” says Van Tilburg. “But the whole idea that there will be some form of digital cash is that. But for the libra it is over and over.”
DNB does not want to go that far. Whether the libra is coming or not? That is looking at coffee grounds, people say there.