Libra’s regulation seems distant, but its release seems even farther. Concerns about privacy and money laundering increase for the US government.
When Facebook announced its intention to launch Libra in June 2019, it decided to release the digital currency in the first quarter of 2020. However, policy experts say that it is unlikely that the project will move ahead at that rate.
Angela Walch, researcher of Blockchain Technologies at the University College of London, said that the probabilities that Libra will be approved in the next 6 or 12 months are low. She noted that this proposal is so massive, with immediate global consequences, that even regulators will need time to think about it.
After sharing its plans for Libra on June 18th, 2019, Facebook has faced a lot o criticism. During the hearings in the Senate and the US House of Representatives, lawmakers criticized the social network for its launch into financial services without having adequately addressed challenges, such as user privacy and the spread of misinformation, in its platform.
Congressmen also criticized the monopoly nature of the Libra project. Facebook, as the main developer of Libra, has led the creation of the Libra Association, which is in charge of managing the network and Libra’s monetary reserve.
During a recent press conference at the White House, Treasury Secretary Steven Mnuchin said that his department is seriously concerned that Libra can be misused for money laundering and terrorism financers purposes.”
The Financial Stability Oversight Council (FSOC), established under Dodd Frank, also has the ability to designate a non-bank financial firm, such as Facebook, for a new and strict supervision that helps minimize the risk of such firm threatening the stability of the financial system.
Essentially, Facebook could be considered too big to fail. It is not clear if the FSOC will exercise this power although in October the organization designated Prudential, its last non-banking institution, as a financial institution of systemic importance.
Katherine Wu, a cryptocurrency legal researcher, commented that the hearings and events regarding the decentralized community on the week from July 15th to 19th showed that Facebook is an easy bipartisan goal for politicians and that the road to be approved will be difficult.
Besides the Currency Auditor’s Office, Wu focused on the “myriad of other agencies,” the New York Department of Financial Services, the US Department of Justice and the Federal Trade Commission, which could also declare jurisdiction over any part of the Libra network or Facebook’s Calibra wallet. He said that, whether or not Facebook will receive regulatory approval from the US, its global coordination with regulators and agencies worldwide will be difficult.
Facebook spokesperson Elka Looks commented that it will be long before Libra is launched, which they cannot do alone. Committing to regulators, policy makers and experts is critical to Libra’s success, the reason that led Facebook and other members of the Libra Association to share their plans from the beginning.
Stephen Gregory, a former compliance officer at Gemini, said that cryptocurrency exchange houses doubt Libra’s aggressive timeline. He added that, given the regulatory landscape, the practical conclusion is to remain in a waiting pattern for a non-insignificant period of time.
By Willmen Blanco