Facebook will attend two congressional hearings in the US Congress to evaluate and give their reasoning for releasing Libra, their newest financial project, a cryptocurrency which is in development by the company. In the planned hearing starting this Tuesday (16/7), Facebook’s Libra plans must refute major points from a lot of financial services commissions and finance ministers around the world, citing security problems and a lack of transparency as reasons for their outrage, while facing what is planned to be two sessions of intense questioning from US Representatives. Experts argue that it could be a long way to go before a decision is made by regulators. Jeff Bandman, former Advisor at the U.S. Commodity Futures Trading Commission said that the types of regulators that are most concerned with the Libra project are those whose mandate is to look after financial stability. Regulators also raised concern over Facebook as they have previously banned crypto-related advertising before, while developing their own tokens.
Libra is a type of cryptocurrency with several benefits such as stability and flexibility as it is not fixed to any country’s currency and will facilitate financial services across all of the company’s platforms including Instagram, Facebook, and Whatsapp. Facebook considers Libra different from other cryptocurrency because the digital money will only function as a means of payment and cannot be an investment container. The currency has made a storm since its paper was released in June, planning to target the unbankable population of the world. Facebook stated that, “Almost half of the adults in the world don't have an active bank account, and those numbers are worse in developing countries and even worse for women.” Moreover, the cost of that exclusion is high -- for example, approximately 70 percent of small businesses in developing countries lack access to credit, and $25 billion is lost by migrants every year through remittance fees." The digital wallet that uses Libra as its cryptocurrency is called Calibra. It is expected that Calibra will improve financial services that will enable people with no bank account to access and participate in the Libra network, a blockchain technology developed by the company. The currency will be overseen by the “Libra Association”, a non-profit organization based in Switzerland.
International reactions have been all around negative, however. US Treasury Secretary, Steven Munchin said that the US government is worried that Libra will possibly be utilized for human trafficking, purchasing illicit drugs, and other uses, as anyone can easily create an account in each of Facebook’s owned social medias. G-7 countries have also stated that Facebook cryptocurrency should not be used before serious regulatory and systemic concerns are addressed. Although Libra could reduce costs for transfer, they could facilitate money laundering and terrorist financing. The fact that a private company will be the regulator of the currency also brings further complications for acceptance of Libra itself, as the transparency and responsibility of the currency will not be as easily held up to international standards of finance. Investors and traders of Bitcoin, the most famous cryptocurrency, have to face an enormous loss as a result of the planned hearing between Facebook and the Congress. Coinbase reported that for the last 24 hours, Bitcoin has dropped 12,69% over US$1,304.95 or on a par to Rp 18,24 million. As Facebook unveiled its ambitious megaproject to change the financial landscape of the world, the global finance sector is watching carefully to see how Facebook’s plan will transpire.
Sources:
CNN
CNBC Indonesia
Bloomberg
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