One of the best social media sites that connect people from anywhere in the world is now offering a service that will also bind the economy. The World Bank’s Global Findex 2017 estimated a maximum of 1.7 billion unbanked people, suggesting a serious condition of the world economy. Most of the countries in South East Asia do not have recourse to any financial instrument or have a single bank account. Also, mobile payment forms are not used.
How did Libra start?
In this terrible condition, Facebook, perceived to be the most popular social network, intended to connect people economically. In 2017 onwards, Facebook began working on its blockchain campaign. In two years, the project attracted 50 engineers who had only one man, Morgan Beller, to work on. In May 2019, Facebook expressed a dream with the public and released a white paper.
What is its major concern?
Facebook’s main concern is to create a fully controlled cryptocurrency for its international users. As the dream is evident, the government’s approach takes time. The legal department for facebook meets US representatives in order to take full government aid and seek to decide on the real goals of Libra.
As expected for the start of the Libra Regulation phase in 2020 it will intensify in the coming days. Nevertheless, once Libra is in the observatory, big networks abandon help from Libra.
Who is leaving Facebook’s Digital currency Libra?
In June, with 28 international allies, facebook delivered its Libra White Paper to the world and opened its doors for regulators to control the currency as it is believed to be unique. Having backed up real assets with an inherent value, Libra cannot be assumed to be a blockchain announced by Twitter. Libra will be the least unpredictable by the existence and an easy payment system to unbanked people around the world.
The major participants were Mastercard, PayPal, Stripe, Visa, eBay, Facebook, Lyft, Uber, Spotify, Andreessen Horowitz, Vodafone Group, Kiva, Mercy Corps, Women’s World Banking and many more.
The Payment Associates were: Mastercard, PayPal, Stripe, Visa and PayU where only PayU is still associated with Libra. Uncertainty is engulfing Libra slowly whether the one Payment mode PayU will still be with them or not.
Marketplaces like Booking Holdings, eBay, Facebook’s subsidiary Calibra, Farfetch Lyft, Mercado Pago, Spotify, Uber were also supported Libra but now eBay, Mercado Pago has removed from the list. While only one payment mode is supported by Libra and two major marketplaces have removed the supports facebook has to be ready to face more challenges.
Take a look at the recent releases from Libra partners.
The first person to withdraw the support from Libra is PayPal on 4 October. Will the world’s largest international payment support, which is no longer associated with Facebook for the Libra Project, take much more? One week before PayPal considered leaving the Libra project, it would be a smart step to take, but the official statement did not reveal the reason.
The company stated to the Verge, “to forgo further participation in the Libra Association at this time and to continue to focus on advancing our existing mission and business priorities as we strive to democratize access to financial services for underserved populations. We remain supportive of Libra’s aspirations and look forward to continuing dialogue on ways to work together in the future, Facebook has been a longstanding and valued strategic partner to PayPal, and we will continue to partner with and support Facebook in various capacities.”
This statement does not illustrate the main reason behind it, but the reason for Facebook’s security might be the reason behind it. The June launch was massive and Facebook was able to gather massive media coverage and investor attention. It wasn’t ten days or so before the story that facebook had PayPal, eBay, Visa, etc. all in its bucket. Now the situation has indicated the drowning of Libra.
With PayPal’s first step, Libra was worried about other partners and his nightmare became a reality. Libra’s major payment supporters, such as eBay, Mastercard, Stripe, Visa and Mercado Pago, left the field on 11 October. While the main reasons remain unknown, PayPal ensures that Libra may not be the best choice for investors.
It all started when Facebook’s CEO announced that even though he is a Swiss-based organization, Libra will not launch until US regulators send a green signal. Libra is ready to maintain all the regulatory issues that have arisen. The main issue now facing Libra is the situation of anti-money laundering.
What SEC and US government think about Libra?
Since the SEC has blocked several ETFs and has stopped the Telegram’s Gram project, Facebook’s Libra is currently on the verge of acceptance and denial. When asked about Libra two different statements stated from two top representatives of the SEC.
SEC chairman Jay Clayton stated, “I’m not prepared to make a decision like that here.” while asked whether Libra can be a security or not. Clayton is going to hold a significant role in Libra’s regulation. Here he stated another fact about cryptocurrencies like Libra, “Cryptoassets, while they have benefits…can present a great deal of risk, particularly in cases where, in form, they are the same as securities or the same as currencies, or the same as payment systems, but they’re not regulated in the same way.”
Another famous face from SEC, Commissioner Hester Peirce, is having a different opinion on Libra. He said, “I would like to see us be a little more forward thinking….I am hoping we can work to create some sort of safe harbour.”
SEC’s opinion is hard to clarify and that may be the reason that Libra is losing the supports. With unclear regulation strategies, facebook is facing real regulators challenge in front of congress about security. Facebook is still not clear about their roadmap on dealing AML situation.
Donald Trump’s tweets on cryptocurrency may not affect the rise of existing cryptocurrencies however; it would affect the upcoming ones like Libra. Trump has declared on 12 July that “If Facebook and other companies want to become a bank, they must seek a new Banking Charter and become subject to all Banking Regulations.”
If the country leader has not opened up his arm to the new project, he will face major obstacles before and after the launch. The concern expressed by lawmakers about the issues of terrorist financing, AML, etc. is not undeniable. So, because of some major issues, the companies are leaving the Library project.
If it’s not the main fact, then who wants to break away from the largest social media platforms? No one’s going to.
What impact will it have on Libra’s Upcoming hearing?
The associated payment system has withdrawn the Libra project participation. Now the hearing is coming, while Mark Zuckerberg has to face the Congressman for the final attempt. While Libra approaches the government in terms of regulatory procedure, US lawmakers will not lose a single chance of scrutinizing the project.
Facebook is promised to be the first legalized cryptocurrency in the real asset-backed system to face the toughest battle for the process. On 23 October, Facebook CEO Mark Zuckerberg will explain the goal and approach of the project to US lawmakers. Hopefully that day Mark will bring the solution of AML situation where the US government has shown the largest concern at.
Libra is losing investor confidence. During the oversight, the cycle is ongoing, as Facebook needs to build a trustworthy stage for shareholders to buy. We will have substantial comments from Mark at this meeting and may address the questions of policymakers as well as stakeholders.
Although these firms are exiting the market, Facebook has told them that the brand will not be harmed. Although transaction partners have left the organization unannounced, the official statement released by Dante Disparte, Head of Policy and Communications for the LibraAssociation to remove any pressure from the sector.
“Although the makeup of the association members may grow and change over time, the design principle of Libra’s governance and technology, along with the open nature of this project ensures the Libra payment network will remain resilient.”