It seems that the Libra project has been in big trouble for a few months, and there are plenty of reasons to believe why it is doomed to fail. Some of this negative influence stems from the major push back from Congress, which has caused a snowball effect of dropping investor confidence and an exodus of support for the Libra project. Is this because of its ties to Facebook and can Libra actually survive, if not thrive, with the absence of the Zuckerberg connection?
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In a Reuter’s article dated December 27, 2019, Ueli Maurer, a professor of Computer Science and head of Information Technology and Cryptography at the Swiss Federal Institute of Technology Zurich, as well as the former President of the Swiss Confederation stated:
“I don’t think (Libra has a chance in its current form), because central banks will not accept the basket of currencies underpinning it. The project, in this form, has thus failed.”
Libra vs Regulators
In the original Libra whitepaper was stated that dividends would be payable to investors but in December 2019 was amended to remove dividends to avoid being classified as a security. This was in response to the United States sponsoring a bill that defines stablecoins as a security. Representatives for Libra have insisted that their stablecoin is a commodity, not a security. And just a month prior, finance ministers from the European Union drafted a document indicating the possibility of impeding development of the Libra coin out of regulatory concern.
Zuckerberg Connection Hurdle
There is little doubt that the connection of Facebook and CEO Mark Zuckerberg to the Libra Project was a huge hurdle. For one, Facebook seemed to be a steady visitor to Capitol Hill after the data privacy scandal broke around July, 2019 where approximately 87 million people were allegedly subject to the collection of personally indentifying information by Cambridge Analytica, a political consulting and strategic communications firm.
In her opening statements, House Financial Services Committee chair, Maxine Waters did not hold back.
“You’re willing to step on anyone — your competitors, women and people of color, even our democracy,”
Congresswoman Waters listed the company’s policy of failing to third-party fact-check political ads; allowing the Facebook platform to be used for election interference; a history of discriminatory housing ads, and for failing to protect consumer data.
Obviously, these issues have huge implications and eviscerated trust. Exactly how much influence did Facebook have in the targeted ads and social influence tools to steer conversations surrounding the 2016 Presidential elections? In the ensuing investigations it was found that there was very little oversight and inadequate safeguards to prevent data harvesting or the abuse of the Facebook API by developers who could take advantage of such data. Facebook’s broad terms and conditions did not help their case.
But, wait. Isn’t Libra supposed to be an independent entity with Facebook as one of its founding Association members? Does the congressional push back imply that Facebook will be called to Capitol Hill every time they support or partner in development and innovation with any other company – or just Libra?
Zuckerberg’s response during the hearing seemingly confirms the objection of Libra’s ties to Facebook and not on the project’s merits. He said, “I believe that this is something that needs to get built, but I get that I’m not the ideal messenger for this right now. We’ve faced a lot of issues over the past few years. I’m sure there are a lot of people who wish it was anyone but Facebook who proposed this.”
We can justifiably assume that if Facebook had no fingerprints on the Libra project, it might not have been so closely scrutinized or instinctively rejected. As it stands, Zuckerberg also stated “If at the end of the day we don’t receive the clearances, we will not be a part of the (sic Libra) association.”
Zuckerberg’s 10-year Plan
Facebook CEO Zuckerberg released a 10-year vision plan for Facebook and he did not name Libra stablecoin as part of its proposed financial services. In his statement, Mark Zuckerberg talked about his personal goals like learning Mandarin, coding, and reading more, but his vision for expanding Facebook with app development and technology, from augmented and virtual reality to being more socially responsible.
Stepping beyond the year to year goals that he’s strived to do in the past, he is focused on a more long-term path with a ten-year plan that deals with generational changes; things like philanthropy, education, climate change, curing disease and focus on students, entrepreneurship, and science.
He mentions decentralizing opportunities for business and services but it seems that Zuckerberg wants to focus on the ability for individuals to be present everywhere through augmented reality and opportunities in that sector.
In Zuckerberg’s long statement, he mentioned governance and asked “how should we govern the large new digital communities that the internet has enabled?” He further went on to say that private companies should not be making these decisions that impact fundamental democratic values but rather address such issues with regulations established through the democratic process, to which Facebook is creating an Oversight Board to handle such issues of community governance.
What does this mean for Libra?
In a statement released by Michael Engel on January 16, 2020, the Libra Association has voted to establish a Technical Steering Committee (TSC) for the Libra project. Five elected members will contribute their perspective and expertise to further Libra’s development and technical design.
From their press release:
The role of the TSC is to oversee and coordinate the technical design and development of the Libra network. Responsibilities include:
- Directing the technical roadmap for the Libra network
- Forming Technical Working Groups to fast-track research into selected specific issues
- Guiding codebase development
- Building a healthy and engaged Libra developer community
As bulleted above, the TSC will be responsible for technical development of the network with the main goal of achieving the Association’s vision of self-governance and being independent of any one organization’s control. As Zuckerberg stated for Facebook goals, the Libra Association strives toward being decentralized with a goal to publish their technical governance framework with its documentation in Q1 of 2020.
The hope is that this process will encourage transparency in the process for evaluating proposals to governance changes within an open source community.
Libra is still alive
Despite the naysayers and push back from Congress against a Facebook connection, there are clear indications that the Libra project is still alive despite the exit of PayPal, Visa, Mastercard, and Stripe, which left Libra with no major U.S. payment processors in the Association.
Libra does have community building initiatives to help onboard new users for the Uplibra OTC Dashboard and they’ve just announced new strategic partnerships with STC.FUND Foundation and LS1.io, which is a professional blockchain content group social network where members can set up their own group and provide others with interesting content or services.
As for Visa and Mastercard, in statement dated back to November 2019, David Marcus, the co-creator and head of Libra has said that their withdrawal is permanent but rather suggested that they are waiting for “regulatory clarity” before they can fully commit to the Libra Association.
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