Since Facebook’s announcement of its plan to launch a global currency in the form of a cryptocurrency called Libra, financial regulators across the world have spat fire and brimstone at the social media company. Now, it seems regulators and lawmakers have finally made an impact given Facebook’s hint that it might not be launching Libra after all due to regulatory concerns, reports CNBC on July 29, 2019.
Facebook’s Risk Factors Section of Quarterly Report Hints Concerns
Per the report, Facebook in the ‘risk factors section’ of its quarterly report said it cannot guarantee that Libra or its associated services will be launched as at when scheduled or at all. The latter was majorly attributed to regulatory concerns from financial regulators who have either begun to probe the company or aired their views about a global currency and its risks.
Facebook, on the other hand, had released Libra’s whitepaper on June 18, 2019, stating that the asset will be launched in 2020. Facebook also revealed Calibra, a digital wallet that will be used to store the Libra crypto asset. Since the release of Libra’s whitepaper, regulators have been up on their toes to see what the social media company has up its sleeves.
For instance, barely hours after the official announcement of Libra, Maxine Waters, chairwoman of the House Financial Services Committee asked Facebook to temporarily stop the development of Libra. According to Waters, Facebook has time and again disregarded the careful use of its data and its announcement to launch Libra is an example of its unchecked expansion into people’s lives.
Generally, Facebook’s intention has made regulators even more wary of this asset class. The latter can be attributed to the US Senate Committee on Banking, Housing, and Urban Affairs announcement on July 24, 2019, that it will conduct a hearing to examine the regulatory frameworks for cryptocurrencies and blockchain.
In June, France also formed a G7 cryptocurrency task force which will examine how central banks regulate cryptocurrencies.
Market’s Acceptance of Libra is Also a Concern
While regulation is Facebook’s major bone of contention, it has also revealed to its investors that there are uncertainties on how the market will accept Libra. For example, a recent poll by CivicScience showed that only 5% out of 1,799 Americans said they have interest in Libra. Similarly, 35 percent of respondents said they trust Libra much less than Bitcoin.
That aside another problem Facebook pointed out is:
“We do not have significant prior experience with digital currency or blockchain technology, which may adversely affect our ability to successfully develop and market these products and services.”
Despite these concerns, a Facebook spokeswoman while speaking to CNBC on July 29, 2019, said the company is willing to co-operate with concerned regulators. She added that Facebook is aware that it would be a long journey until Libra is launched. As such, this prompted them to unveil the asset early and solicit the backing of companies like PayPal, Uber, amongst others.