Facebook’s Libra has made many headways, and it has been a long journey shrouded in mystery. Now that the details are out, the project is taking up a lot of heat. Regulators are concerned about the implications of the project, even though it is more centralized and controlled than pure crypto. The reach of Facebook and its partners is what makes regulators worry. The threat of crypto has been known for some time, but this project has the potential of pushing crypto into the mainstream. Now, US lawmakers are pushing for a new regulation that will put a fine of a million dollar on tech companies getting involved in finance.
Up in arms
Even before the formal announcement of the project, concerns were raised and calls to halt the project was already coming out. US regulators and politicians expressed concerns close on the mid-2019 announcement. Maxine Waters, Chairperson of the United States House Committee on Financial Services Committee, asked Facebook to halt the development and launch of Libra, citing a list of recent scandals and that “the cryptocurrency market currently lacks a clear regulatory framework”. The U.S. House Committee on Financial Services Democrats sent a letter to Facebook asking the company to stop the development of Libra, citing concerns of privacy, national security, trading, and monetary policy.
Once Facebook made the announcement about Libra, the concerns and criticism were quick to come in. Jerome Powell, chair of the Federal Reserve, testified before Congress on 10th July that the Fed had “serious concerns” as to how Libra would deal with “money laundering, consumer protection, and financial stability. President Donald Trump tweeted 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.” And finally, the doomsday bill was recently revealed.
“Keep Big Tech Out of Finance” bill proposes to “prohibit large platform utilities” from becoming a financial institution or getting affiliated with a person that runs a financial institution. If companies fail to comply with the regulation will be fined a huge sum of a million dollar a day. Which will make most tech companies think twice before entering crypto, this legislation goes in cover not just crypto but in great depth. In general, “large platform utility may not establish, maintain, or operate a digital asset that is intended to be widely used as a medium of exchange, a unit of account, store of value, or any other similar function, as defined by the Board of Governors of the Federal Reserve System ”. Yes, it is large but it goes in depth to a point where tech companies cannot get involved in finance at all.
Bitcoin is still gold
Going through the wordings of the legislation it is clear that it is too intrusive and overreaching. If it gets passed this new law will have unintended consequences. Right now, Libra has a central structure and is a permission blockchain and that is the reason why legislation can tame it. This makes decentralized crypto like Bitcoin more attractive since governments cannot exert their influence over them. So what ends up happening is the government promotes crypto inadvertently, while blocking more controlled projects like Libra.
When Facebook announced Libra, it was good news for the whole crypto community. It meant that for the first time the technology will be accessible by billions. The positive enthusiasm the project created had a huge impact on the market, it was the single largest factor which pushed Bitcoin price to $14k. But the good news for some is a nightmare for others, like the US government whose ability to spend unlimitedly depends on Dollar being the reserve currency. A crypto project capable of reaching billions globally is a national security threat, and this explains the disproportionate reactions towards the project. But this goes to show the amount of power the government has over everything from finance to corporate structuring. As we have discussed before, this only makes the cause for crypto even more relevant. The power to shut something before it even begins being with the government should frighten everyone, especially in America where the idea of a small government is embedded in the constitution in order to keep the government small.
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