The CEO of Facebook, Mark Zuckerberg, attended a congressional session on last Wednesday. His next ‘big idea’ of the globally renowned social network to foray in cryptocurrency was met with tremendous disdain.
Libra is an about-to-be-launched cryptocurrency, which is securely backed by international assets. Its calling card is the ability to spend it anywhere all over the world. This also poses a ‘big if’ for the central banks and governments to come to terms with a global currency, which is conveniently backed by their own money.
Facebook’s founder has emphasised that Libra will be working within the confines of the law. However, shoring up support from the congressional committee members seemed to be a bridge too far for Zuck.
Nearly all the lawmakers that spoke to Mark Zuckerberg reminded him of the corporation’s past failures and intensity efforts to gain trust before he started the Libra project.
What is Libra?
According to Mark, the cost of monetary transactions is far too high to pay. Sending money to families abroad can be painstaking, if not time-consuming. The present system has failed to address these issues and Libra aspires to meet these acute needs.
Twenty-one companies will jointly manage Libra apart from Facebook. The founder sees the 2 billion users of Facebook as an opportunity while it is seen as a threat to monetary system and a medium for illicit activities.
Money Laundering and other Concerns
For most of the committee members, the prospect of Libra as a medium to finance terrorism, purchase weaponry, illegal drugs and money laundering was a significant concern.
Brad Sherman, a US Democratic, accused Mark of profiteering from the platform under the guise of helping the world’s poor population. He further went to say that Mark is establishing a support system for tax evaders and drug dealers, consumers for whom dollar is not a suitable currency.
Mark’s Stand on the Concerns
As per Zuckerberg, the Calibra (a subsidiary of Facebook) and Libra Association will be compliant with all of the American financial regulations and bodies. This includes Anti-Money Laundering, Bank Secrecy Act, US Federal Reserve and Federal Deposit Insurance Corporation.
The Calibra (a digital wallet) is a secure system that prevents attempts from money laundering and other illegal activities.
Over the concerns of replacing the central banks’ ability to determine the nation’s monetary policy, Mark made his stance clear by stating that he had no intention to position Libra as a sovereign currency for consumers. He clarified that Libra is planned to be backed by dollars for the most part.
Interestingly, the hearing was primarily called over concerns that were raised about Facebook’s plans to launch new payment methods and cryptocurrency. But some members of the committee digressed and raised concerned over other burning issues as well.
The owner of the social network worth around $138.3 billion was quizzed about his stand on the 2016 election, discrimination against minorities, impact of ‘deepfake’ videos, Facebook as means for sex trafficking and much more.
Repercussions for Facebook after the Senate Hearing
This hearing is another roadblock for Facebook to initiate the Libra project. Facebook and its alliances had hoped to achieve its completion by the mid of 2020. That timeline is now uncertain and many of the partners involved in Libra have jumped ship. This has created a void and Libra is in for some rough sailing until it gains approval.
The corporation has established the governance structure and finalised articles of association to manage the flow of digital currency. Libra could potentially change the global payment systems on its head and monetary transactions would never be the same again.