Facebook’s ‘failed’ Libra Cryptocurrency is No Closer to Release

In the booming era of blockchain, Facebook’s Libra Association markets itself as an “independent, not-for-profit, membership organization, headquartered in Geneva, Switzerland” aiming to increase access to the global financial system and services. (Libra.org). In a world where 1.7 billion adults don’t have adequate access to the global financial system, Libra’s cryptocurrency claims it has the answer. (Id.) Through distributed network governance, open internet access, and cryptography security, cryptocurrencies aim to increase accessibility to financial services. (Id.) Yet, the volatility and value fluctuation of existing cryptocurrencies has hindered their adoption by the mainstream market. (Id.)

Libra claims to be more reliable than other cryptocurrencies because it is backed by an underlying “collection of established financial assets.” (Libra FAQ) Libra hopes to avoid the investment speculation and fluctuation that plague other cryptocurrencies by backing each Libra coin with stable, liquid assets through a reserve. (Id.) By backing Libra with debt from multiple governments with low default probability and short-dated government securities traded in liquid markets, the organization claims users will be able to rely on the value of their coins over time. (The Libra Reserve). 

Despite these assurances, the Libra currency may not actually receive the approval necessary for market release. (Hugo Miller, Bloomberg). The currency is seeking regulatory consent in Switzerland, but Swiss Finance Minister and outgoing President Ueli Maurer recently deemed Libra “a failure.” (Brenna Hughes Neghaiwi, Reuters). German Finance Minister Olaf Scholz echoed this sentiment, claiming Libra should be “prevented.” (Jon Buck, BeinCrypto) Amidst this concern, U.S. regulators fear Libra could also undermine the stability of existing currencies including the U.S. dollar, support money laundering activities, and cause privacy concerns. (Hugo Miller, Bloomberg) Chairwoman Maxine Waters (D-CA), of the U.S. House of Representatives Financial Services Committee, commented that “it appears that Facebook is working to create a global financial system that is intended to rival the U.S. dollar.” (Jason Brett, Forbes). The U.S. Securities and Exchange Commission expressed similar apprehensions, citing the possibility of crypto assets being used to evade regulations. (Id.) Even Facebook chief executive Mark Zuckerberg testified before the U.S. House Financial Services Committee that Libra is a “risky project.” (Ejinsight.com).

Facebook initially chose Switzerland as Libra’s birthplace because of the Swiss government’s excitement and warm welcome toward such an “ambitious international project.” (Bloomberg). However, without regulatory support and approval, the cryptocurrency is effectively in limbo. Additionally, many founding members of the Libra Association have withdrawn support in response to the regulatory backlash. (Corrine Reichert, Cnet). Most recently, Vodafone exited the association following eBay, Visa, Mastercard, and PayPal. (Id.) As large companies continue to withdraw their backing and regulators refuse approval, Libra may be forced to suspend its anticipated 2020 launch.