Facebook’s Libra Project is getting massive pushback from regulators right now, and it is starting to scare some of its backers. 3 firms who originally intended to participate in the project are starting to express doubts over whether they want to be linked to such a controversial news item.
The firms in question have chosen to remain unnamed, but as regulatory pressures have intensified, it was natural that some players would want to avoid the additional hassle.
With the EU looking at the Libra Association due to potential antitrust issues and the U.S. trying to figure out if Libra has the potential to cause financial collapse, the project has slowed down a lot since its initial unveiling.
Troubles Within the Association
Reports state that Libra has had 28 member firms pay sums of up to $10 million to join the project. Starting in mid-June, Facebook was able to recruit big players like Visa, Paypal, Uber, and Mastercard, and although nothing binding has been signed yet, this seems like the beginning of a massive conglomerate.
The real difficulties lie in the way these partners want to be perceived by regulators. Their core businesses need to be seen as operating with regulatory compliance, which makes the Libra Project a potential threat to these businesses.
From a strategic perspective, it is strange that Facebook didn’t address any of these regulatory issues before announcing the project. This could theoretically be a way for them to attempt to strongarm the government by obtaining grassroots support and creating a minimal viable product before dealing with the issues. However, this would be more viable for a smaller company with nothing to lose, rather than one of the biggest technology companies in the world.
Moving forward, it looks like Facebook is getting irritated with the other members of the Libra Association, as they are too afraid to put their necks out and are leaving Facebook high and dry.
A Possible Global Threat
Besides the standard issues with regulating cryptocurrencies that have been a problem since the beginning, there are several larger concerns that regulators are presenting right now. First, they are worried that the Libra Project could destabilize the global economy. As more users use Facebook’s stablecoin, central banks would lose much of their power to manipulate their own economies, and it wouldn’t be possible to guide certain aspects of it as freely.
The second issue is that if the Libra Project achieved mass adoption, Facebook would have a form of control over the global economy. This is linked to the first issue, but reflects a deep insecurity over how the world will be run for the next few decades. The world has seen a shift towards technocracy, and this is just one more in a long list of moves out of Silicon Valley that threaten the current power structure.
Investing in Bitcoin has always been controversial for the reasons stated above, but the idea of a single firm, rather than a decentralized community, running the global economy is very scary. The power of Bitcoin and Ethereum is their ability to innovate on power structures and monetary systems at the same time, so Facebook’s Libra Project is actually a step back from these in many ways.