Facebook’s very first step in the world of cryptocurrency, the libra was presented to the users this June and since then has been a topic professional analyst have been debating on. Facebook’s Libra is a digital currency (cryptocurrency) based on a chain of blocks that Facebook intends to create, together with an association and group of more than one hundred companies. Facebook has also announced that the social network giant would also offer wallet services under the name Calibra in the coming months.
Just a few hours after Facebook announced its plans about Libra, the concept was quickly criticized by governments and some of the central banks worldwide. These critics now seem to be winning Facebook itself. In its quarterly report to the US supervisor SEC, the company mentions various obstacles and unclear regulations.
“There is no certainty that libra or our associated products and services will be available someday or even during a certain period,” reads the report to the SEC. The company alludes to the absence of a law on crypto-species and criticism from various governments.
The reports also suggest that Facebook’s libra as such involves certain risks. “Our participation in the Libra Association is subjecting us to a strict regulatory investigation, as well as other risks that could negatively impact our business, reputation or finances,” reads the report sent by Facebook to the SEC. He added that the company has “no serious previous experience with either digital currencies or blockchain technology”, which could be a disadvantage for the development of products and services.
For the sake of clarity, the statement does not mean that Facebook buries its ambitions now with libra. As a listed company, it is obliged to mention all the risks to which it is exposed.
The report notes, however, that Facebook observes that it is subject to more criticism than it initially imagined. In the United States, these grievances came mainly from the Minister of Finance and the US Central Bank, but also his Japanese counterpart. The French finance minister also expressed his concern. So far, it must be recognized that apart from Facebook itself and businesses that have agreed to participate in libra, there are still few public supporters of this virtual currency.
Two weeks ago, Facebook came to defend itself in front of the US Senate. But could hardly find support. One of the senators even called Facebook “a child playing with matches”. It’s mostly Facebook’s long and unpopular reputation for privacy and data transfer to third parties that makes the idea that the company now wants to deploy its currency.
Although Facebook’s cryptocurrency can improve the lives of millions of people in underdeveloped countries, it would also be an instrument of change in the first world. Therefore, a threat to the authorities of the global monetary policy, from the Federal Reserve to the European Central Bank, which opens and closes the liquidity trap with interest rates and now see an incipient rival in Libra.
Commercial banking also has reasons to ride with the fly behind the ear. Libra may be the optimal solution for digital payments. And payments are currently one of the most profitable niches for banks. Significantly, there is not a single bank among the founding partners of the Libra consortium.
Facebook has decided to step on the brake of Libra. For now. Financial, regulators, politicians, technologists and even thinkers of the digital economy expect events: with cryptocurrencies, Facebook does not move fast, but it can break many things.