The regulatory environment in the U.S. seems rather hostile towards Libra as things are heating up for Libra on a global scale with Facebook’s ambitious digital asset launch set to be blocked in Europe, India, and China. Facebook instituted a governing body for Libra in Switzerland and now even Swiss Central Bank‘s chairman and executives are expressing growing concerns around Libra and other stable coins.
France has said it will block the development of Facebook’s Libra cryptocurrency as it poses a threat to “monetary sovereignty”. At the opening of an OECD conference on cryptocurrencies, the French economy and finance minister Bruno Le Maire said: “I want to be absolutely clear: In these conditions, we cannot authorize the development of Libra on European soil.” Add that to concerns and restrictions in India, where Libra was initially seen to provide the most significant potential and tandemly Facebook’s biggest user market, the environment looks pretty hostile for Libra.
The regulatory environment is less than conducive for Libra as most politicians are not convinced by the project’s safety aspects. In response, Facebook keeps stressing Libra’s compliance with regulators and readiness to discuss possible frameworks. Facebook is facing challenges with regulators largely due to its bad reputation concerning security, safety, and trust. The Senate highlighted that Facebook has a lot of work to do with regards AML and compliance before convincing US regulators that they have a role to play in issuing cryptocurrencies.
Crypto companies are taking a long term view of compliance. A draft bill titled “Keep Big Tech out of Finance” surfaced right before the testimonies before Congress took place. This raises the question – Does the U.S. government have the power to ban Facebook’s Libra? The new bill may successfully stop Facebook from working on Libra. In its current form, the bill is not more than a stunt move. It doesn’t have enough political support and the U.S. government will not tackle the bill unless it is backed by enough evidence.
A complete ban is highly unlikely and untimely, however, the law may place a structural separation between banking and non-banking activities (e.g. the Bank Holding Company Act that prohibits bank holding companies from going into non-banking activities). The government may resort to milder measures to police Libra. They can institute oversight mechanisms and regulate data collection and how that data is used and shared.
At this point, authorities may not resort to a complete ban. The US competes with numerous countries to be an economic and technological superpower and banning Libra could be considered a hostile move against tech. It could push innovation overseas; not a prudent act where industry advantages could outweigh the liabilities. The push-back from various countries is delaying Libra’s launch and for its part, Facebook says that it anticipated resistance, which is why it gave itself such a long lead time before the project’s full release.
The Libra Association and its members are committed to working with regulatory authorities to achieve a safe, transparent, and consumer-focused implementation of the Libra project. The social media giant recognizes that blockchain and digital assets are emerging technologies and policymakers will take their time to consider how its applications fit into their financial system and economy.
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Libra Facing A Hostile Environment
