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The Libra coin is very likely the defining technology story of 2019. This is because Facebook is one of, if not the most powerful Private Corporation in the world. The social media giant has vast wealth and influence on account of its treasure trove of user information.

Libra Coin

Understandably, the announcement in June that it would develop the Libra coin was immense. The Libra coin is an ambitious project that can raise tremendous changes in finance and banking if successful. That said, will it be all smooth sailing for Libra coin? Let’s find out.

Facebook has legitimate commercial and utilitarian interests in pursuing this project. In addition to that, a number of high profile partners have already signed up. The Libra coin has the following possibilities:

  • Libra can reach 1.7 billion unbanked adults globally. This demographic is mostly from developing countries and would be a bonus for global commerce.
  • Users will have an efficient and fast payment option directly from their WhatsApp or Facebook accounts.
  • Cryptocurrency payments can reduce traditional banking transaction costs by over 80 percent, especially, for cross border payments.

The challenge to this project has a lot to do Facebook’s recent poor reputation in handling data. Moreover, regulators have concerns over a whole range of crypto-specific issues.

What’s all the fuss about then? Well, the challenge to this project has a lot to do Facebook’s recent poor reputation in handling data. Moreover, regulators have concerns over a whole range of crypto-specific issues.

The Concerns

On July 16th 2019, Congress subpoenaed Facebook’s Libra lead, David Marcus for hearings over the impact of Libra coin. The hearing was over a number of issues that politicians wanted to be ironed out before this project could go ahead. The hearings brought forth many concerns that regulators have with the proposed project.

As such, the project has a lot to do to get to regulatory compliant status. Speaking to CNBC, analyst Lisa Ellis contends that the Libra coin has a reasonably low probability of reaching fruition as it is. She obviously refers to the possibility of Libra getting the position of a credible alternative currency in large markets in a few years.

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The primary reason for this position is the regulatory pushback Facebook faces in this drive. Facebook has had publicized data privacy violation breaches in the recent past. The events in the lead up to the 2016 election are particularly concerning. This is because Cambridge Analytica, a campaign agency, illegally got the private data of over 50 million Americans and used the information to conduct sweeping targeted campaigns. In the past two days, the world has watched closely the testimony by Special Counsel Robert Mueller which highlighted Facebook’s extensive failures in this period to protect data privacy.

Facebook, therefore, does not enjoy the position as a trusted tech darling it did in the few years after launch. Regulators need assurances on issues such as:

  • The manner in which Facebook will handle the private data of the billions of potential Libra coin users.
  • Preventing illegal use of the Libra coin in money laundering and terrorist financing. This is a concern for cryptocurrencies in general.
  • How the Libra coin itself be structured? Will it be a stable coin whose value is standard? Will it simply be a payment option?

Is Cryptocurrency on The Verge of Global Acceptance?

In general, cryptocurrency is still a Pandora’s Box to many regulators. This is because of the 193 or so governments; none has recognized cryptocurrency as legal tender. Even though Facebook has the institutional might to fight for legitimacy, the fact remains that regulators across the world are trying to come to terms with a technology in its relative infancy.

Bitcoin and other cryptocurrencies mostly operate without official regulatory sanction. Accordingly, the Libra coin is facing legitimacy questions. The most likely outcome is a payment system that simply uses the blockchain which is less controversial.

Regardless, distributed ledger technologies (DLTs) have enormous upsides. The immutability of blockchain technology is still an attractive proposition even to governments. The Libra coin can certainly ride this wave and hope that by the time its development is complete, regulators will have warmed up to cryptocurrency better.

In summary, this project despite having plenty of potential benefits has an uphill climb ahead. Facebook has the institutional and financial might to implement it but its reputation as a safe custodian is problematic. This project will, therefore, be an interesting litmus test on America’s regulatory landscape in the near future.