Facebook has acknowledged that its cyrptocurrency Libra, which it plans to launch by 2020 in partnership with 27 other organisation, might never really see the light of day given the intense regulatory scrutiny as well as other risks associated with the project.
In its filing with US Securities Exchange Commission (SEC), Facebook also admitted that Libra is “based on relatively new and unproven technology, and the laws and regulations surrounding digital currency are uncertain and evolving,” which could have a negative impact going foward.
The company also said that, “Libra has drawn significant scrutiny from governments and regulators in multiple jurisdictions,” and Facebook expects this scrutiny to continue. Libra is a cryptocurrency based on blockchain technology.
According to the company, the associated inquiries or investigations could ‘delay or impede’ the launch of Libra currency. Facebook’s filing also admits that market acceptance of Libra will be crucial for its success and this is uncertain.
“As such, there can be no assurance that Libra or our associated products and services will be made available in a timely manner, or at all,” reads the filing.
The filing says, “we may be subject to a variety of laws and regulations in the United States and international jurisdictions, including those governing payments, financial services, and anti-money laundering. In many jurisdictions, the application or interpretation of these laws and regulations is not
clear, particularly with respect to evolving laws and regulations that are applied to blockchain and digital currency.”
Facebook also goes on to admit that the company does not have prior experience with either “digital currency or blockchain technology,” and this could impact their ability to successful develop and market these products.
Where regulator concern goes, the US Federal Reserve Bank had already announced that it was working to study the impact of Libra and that the project raises serious privacy questions as well.
David Marcus, who is heading the Calibra project and is also listed as a co-creator of Libra, according to his LinkedIn profile, has testified before the US Senate Banking Committee and the House Financial Services Committee on the subject already and faced some tough questions.
Some US Senator and Congress members have already expressed that they are critical of Facebook’s new cryptocurrency project. Senator Elizabeth Warren, who is also a running in the Democratic Presidential candidate race, during the Senate hearing said, “What Facebook’s been really good at is figuring out how to monetise people’s personal data,” adding that she was not reassured by the company’s statement that there would be no data sharing between the platforms.
In the United Kingdom too, questions have been raised about Libra. Christopher Woolard, executive director of strategy and competition at the UK’s Financial Conduct Authority, was quoted as saying, “Libra’s size and scale will pose questions for society and government more generally about what is acceptable and desirable in this space.”
Facebook has said that Calibra will be a separate Facebook subsidiary, and serve as the wallet where users can store their Libra currency. The wallet will be available in Facebook Messenger and WhatsApp as well, but the company insists that data from Calibra will not be shared with the main company.
In the recent earnings call for the second quarter of 2019, Facebook CEO Mark Zuckerberg addressed some of the questions around Libra. He reiterated that the Libra Association will be “independent of Facebook or any other member” and that the goal is to “empower billions of people around the world, who use services like WhatsApp but might be excluded from banking services.”
On the regulatory concerns, he said that the aim with Libra was to “provide a safe and stable and well-regulated product.” Facebook will also be facing an antitrust review from the US Justice Department, along with other big tech firms like Apple, Google, and Amazon.