Is Facebook Libra Dead? Can Libra Survive Regulatory Scrutiny?

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The Libra project seems to have been in great difficulty over a couple of months and there are many reasons to believe why it is doomed to fail. Some of this negative impact is due to a congressional reversal which has led to a decline in investor confidence and exodus of support for the Libra project. Is this due to its Facebook links and can Libra survive, if not prosper, without the Zuckerberg connection?

In a Reuter article on 27 December 2019, Mr. Ueli Maurer, Professor of Computer Science at the Swiss Federal Institute of Technology and Head of Information Technology and Cryptography, said:

“I don’t believe (Libra has a chance as it stands), because central banks won’t accept a basket of underpinning currencies. The project thus failed in this type.”

Libra vs Regulators

Dividends were reported to be payable to investors in the original Libra whitepaper but were modified in December 2019 to remove dividend to prevent them from being classified as a security. In response to the US introducing a bill describing stablecoins as protection. Libra representatives insisted that their stable coin is an asset, not a defense. And a month earlier, EU finance ministers produced a document indicating the possibility of preventing the development of the Libra coin from being regulated.

Zuckerberg Connection Hurdle

There is little doubt that Facebook and CEO Mark Zuckerberg’s connection with the Libra project was an enormous obstacle. For one, after a data protection scandal in July 2019, Facebook seemed to be a constant visitor to Capitol Hill. Cambridge Analytica, a political consultancy and strategic communications firm, allegedly collected about 87 million people’s personal information.

Maxine Waters, Chair of the House Financial Services Committee, did not hold back in her opening statements.

“You are ready to step into anybody–your competitors, women and colorful people, even our democracy,” Congresswoman Waters listed her company’s failure to monitor political ads from third parties, allow Face book platforms to be used for electoral interference, and provides a history of discriminatory housing ads and consumer data protection.

These problems have enormous consequences and eviscerated confidence. How much did Facebook impact the targeted advertisements and tools for social influence in the debates around the presidential elections of 2016? In the subsequent research, very little security and insufficient protections were found to avoid data collection or misuse of the Facebook API by developers who could benefit from such data. The specific terms and conditions of Facebook did not help their case.

Yet, wait, wait. Shouldn’t Libra be an independent entity with Facebook as one of its founding members? Will Congressional support mean that Facebook is being called up at Capitol Hill whenever it assists or helps any other organization in creating and innovating — or just Libra?

Zuckerberg’s response during the hearing reflects Libra’s opposition to Facebook and not the merits of the idea. He said, “I think it needs to be created, but I don’t get that right now I’m the best messenger. Over the last few years, we have faced a lot of problems. I am certain that many people want it, but Facebook has proposed it. “We can rightly assume that Facebook could not be so closely scrutinized or instinctively rejected if there was no fingerprint on the Libra project. Zuckerberg said, “When we don’t get clearances at the end of the day, we won’t be a part of the (sic Libra) community.”

10-Year Plan of Zuckerberg

Facebook CEO Zuckerberg released a 10-year Facebook vision plan and did not include Libra Stablecoin in its planned financial services. In his statement, Mark Zuckerberg spoke of his personal goals such as learning Mandarin, coding, and reading more but his vision for expanding Facebook from enhanced and virtual real-life to socially responsible app development and technology.

Stepping beyond the goals he has strived to achieve in the past, he is focusing his efforts on a longer-term path with a 10-year plan to address generational changes; philanthropy, education, climate change, curing diseases and student focus, entrepreneurship and science.

He addresses decentralizing business and services opportunities, but Zuckerberg tends to want to concentrate on the potential of individuals to be present everywhere through enhanced reality and opportunities.

He mentioned governance in Zuckerberg’s long statement, asking “how should we govern the large new digital communities the internet has enabled?”He also claimed that private companies should not take such decisions that affect fundamental democratic principles but should instead fix those problems with rules established through the democratic process, to which Facebook is setting up a Supervisory Board to deal with such matters of Community governance.

To Libra, What Does This Mean?

The Libra Association voted to establish a Technical Steering Committee (TSC) for the Libra Project in a statement released by Michael Engel on 16 January 2020. Five elected members will contribute their perspectives and expertise to the development and technical design of Libra.

From their press release:

The role of the TSC is to supervise and coordinate the Libra network’s technical design and development. Liability includes:

  • Directing the Libra network technological roadmap.
  • Forming Technological Working Groups to monitor selected unique questions quickly.
  • Guiding the growth of the codebase.
  • Build a safe and active group of libra developers

As mentioned above, the TSC will be responsible for the technical development of the network to fulfill the goal of the Association’s self-governance and to be independent of the influence of one organization. As Zuckerberg said for Facebook’s goals, to publish its technical governance framework in the first quarter of 2020, the Libra Association aims at decentralization.

This process is hoped to promote transparency in the process of evaluating proposals for change in governance within an open-source community.

Libra is still alive

No matter how badly you are thinking that the Libra project is still alive, even with the departure of PayPal, Visa, Mastercard, and Stripe, which left Libra without major US payment processors in the Association, there are clear warnings from Congress against a Facebook link.

Concerning Visa and MasterCard, David Marcus, co-creator and leader of Libra, claimed in a statement dated November 2019 that their withdrawal was permanent, but that they needed “regulatory clarification” before they could make a full commitment to the Libra Association.

Dustin

Since 2011, Dustin has been an active member of the community of cryptocurrencies. Dustin is a Washington-based financial-tech reporter. He's passionate about bitcoin, open source code, and decentralized apps. Dustin wrote thousands of articles about the innovative protocols.

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