Facebook’s Project Libra has faced significant backlash in recent weeks after Germany and France both selected to block the worldwide stablecoin project, with the United States Courts announcing stern warnings for all members in the Libra Association. This prompted PayPal, Visa, MasterCard and Four other companies to leave the association. Unfortunate for Facebook, this was a gruesome reminder that the governments hold ultimate power and not themselves. Ten years after the revolution of Bitcoin, it’s still challenging for any company to overcome the monopoly of any nation. However, traders shouldn’t doubt that Libra will launch, as 21 of the 28 members who signed on with the association reached a consortium last week in Geneva. There’s a substantial chance that Facebook will still manage a semi-worldwide stablecoin and make billions yearly from the Libra Coin.
The positive outlook towards Libra for some is foolish. The ever increasing demand for regulation against Libra has been combatted by the Bank of International Settlements and the Financial Action Task Force. Both of these regulators announced that the Libra Stablecoin is a substantial threat for the increase for anti-money laundering, finance stability and financial monetary compensation for clients. Facebook has made zero efforts to avoid these potential threats, which has been cause for more concern amongst Commission Chiefs like Gary Gensler. He argues that the Libra Coin should be maintained and regulated as a security. Certain analysts have determined that at some point, these governments will have to conform to the growing momentum that are digital currencies. Global economic growth and geopolitical sustainability is prompting the rise of cryptocurrency blockchain technologies. The governments of the world ultimately will have to decide if they’ll embrace blockchain or compete against it.
The Libra Project has been a driving force in the momentum of blockchain/cryptocurrency technology. Facebook caused for the international topic to be debated against amongst governments, businesses and developers. However, Facebook wouldn’t have gained this momentum without the rise of Bitcoin in the last decade. Bitcoin is the first cryptocurrency and to this say is still independent from any other fiat currencies. Without the success of BTC, the Libra Coin would never have been invested.
The concern is the direct coordination of governments with stablecoins. Whichever mainstream currency emerges after the chaotic next decade will require that governments create their own reserves of stablecoins. There’s also a chance that Fiat Currencies or AltCoins could make a return, requiring the government to hold reserves of these blockchains. This will require that the Libra Association and regulators both come to agreements in the coming years, compromising on certain factors that can have both parties pleased with end results. However, this can’t begin until the momentum slows down and there isn’t so much confusing relating to this chaotic period.
Project Libra and its association of members are able to move forward thanks to the Switzerland Financial Market Supervisory Authority. Their supporting the project by providing it with a regulated headquarters, which is one less issue for the association. Now the project will have Calibra and its employees work extensively on regulatory compliance. This will be a challenging task with the removal of Visa and Mastercard, who have substantial recourses in this sector. However, Facebook and their associated members are wealthy enough that they can continue negotiations without the assistance of either credit card company.
Facebook and its associated members have found certain loopholes that will most likely enable them to offer the Libra Coin is jurisdictions that have banned the stablecoin. This loophole is geofencing, who enables for Facebook to implement cross-border transactions without high costs. Subsequently, new smart contracts can be created for commerce with new digital identity models. The end result is that the loophole allows for Libra to securely provide their coin to less fortunate individuals. Facebook’s plan to make the Libra Coin popular amongst the un-wealthy, which will prompt Governments to lower restrictions. Considering that Facebook has the help of Foxconn and their associated members, tens of thousands of relationships can be accessed at a time. This is forcing governments to allow Facebook to move forward with their stablecoin plans.
There are multiple counties like India, that have begun hostile towards all cryptocurrencies and blockchain products. However, there’s a flipside to that coin with multiple other countries looking to invest into Libra. These include multiple Caribbean, Maltese and Eastern European Countries. Interacting with these countries would just enforce stronger compliance requirements from financial hubs like London and New York. This has put Facebook in a position with banking and government relationships are more important than growth of Libra. When this era is over for the Libra Association, they have countries like Bermuda willing to assist them with growth.
Facebook has their eyes on India though, with the Caribbean being considerably smaller in geographic size and population. The only benefit for these islands is that they are tax havens, which would allow the social media giant and their associated partners to funnel money through offshore banking accounts. These islands operate offshore accounts for other banking institutions, mutual fund groups, insurance firms and hedge funds. It’s estimated that more than $1 Trillion in Financial Assets are held in the Caribbean.
There could be new innovation in terms of regulation with the London Stock Exchange. Post-Brexit, England won’t need to abide by the legislation implemented by the ESMA. Additionally, there will be forced innovation in Hong Kong is they succeed in their liberation from China. Just like London, Hong Kong won’t need to abide by the laws implemented by the Chinese. The only concerning major markets for Libra is the United States and India, who both express their concerns regularly. Luckily, there are now senators in America that are supporting the blockchain coin after two senators sent out ominous warnings to members in the association. Those Senators with Sherrod Brown and Brain Schatz, with Mike Rounds being the only government official to publicly come out with supporting the coin.
There’s also a global challenge that is benefiting the growth of Libra. The global economy is weakening due to trade wars amongst China and the United States, with trillions of dollars in the public/private space being threatened everyday. Western Economies like America, Mexico and Canada have expressed fear that there could be a collapse on currencies. The provision of Libra across Facebook Messenger and WhatsApp could solve these potential collapses before them begin, bringing new life into North American and Mexican economies.
Facebook and their associated members aren’t the only companies looking to provide stablecoins to their customers. The biggest challenge facing the Libra Association are companies like Telegram or Walmart, who are working towards a blockchain solution with high profits. Unlike Facebook, these companies don’t have horrendous reputations. The social media giant has faced these hurdles due to criminal proceedings that took place last year in America. Facebook was found selling billions of user data information to third-party clients. This immediately prompted concerns that the giant corporation would commit this crime again, but with financial data this time.
Another worldwide corporation that’s exploring blockchain technologies is Walmart, the largest global retailer of goods. Walmart has better opportunities to launch the WalmartCoin because it will work in correlation with their stores. Consumers can purchase their goods and services through the upcoming blockchain coin. Furthermore, both MasterCard and Visa are creating their own payment networks that operate on blockchain tech. This is another reason why the two credit card companies didn’t hesitate to leave the Libra Association after receiving multiple warnings from government officials. It’s anticipated that MasterCard will be an important player in the Stablecoin space, as they’ve hired multiple blockchain experts in the last three weeks.
The Digital Solutions Firm Vice President, John Lambert, spoke on the regulation issues when he was publicly asked on his departure from the Libra Association. He stated: “It’s not that we don’t think Libra has long term value, or no longer has merit. It’s that they were asking original founding members to become formal members inside a legal entity, at a time when the regulatory framework is very uncertain. We don’t actually understand entirely the implications of membership. We want to wait for regulators to have clarified that framework before we take on this liability.”
The End Game
The way that the market is shaping, companies operating in the blockchainstablecoin space will need to hold public-private partnerships with banking institutions. There are individuals in the market that one day hope central banks will burn and mint blockchain coins as a physical item. The incoming and outcoming physical/online tokens is inevitable. Retail customer experiences are considerably better with stablecoins and guarantees citizens that these companies work in correlation with the government. It’s anticipated that there will be specific classes for cryptocurrencies, with advocates still being able to trade and invest into stablecoin products. This is the ultimate goal for the blockchain space, with store locations and retail websites all supporting the payment method. It’s just unknown if that payment method will be Bitcoin, Stablecoins like Libra or some other blockchain product.