In a rare case of legislative humility, Facebook is being forced to “scale back” plans for its controversial cryptocurrency Libra (≋LBR) following nine months of constant Congressional backlash, according to updated white papers examined by The New York Times. And so it appears even Silicon Valley’s most powerful predator can’t escape the court of public opinion.
“The Association has made changes to its initial approach, many of which depart from the approaches taken by other blockchain projects,” Libra’s statement reads. “We appreciate the discussions with policymakers around the world who have helped us understand key concerns so that we can integrate actionable improvements into the Libra payment system’s design and into a phased rollout plan.”
The recent announcement only confirms the reported leaks previously published by Bloomberg and The Information, citing multiple Facebook associates on how Libra was reportedly scrapped from being “the centerpiece of Facebook’s planned digital payments program.” Instead, the company is transitioning towards being a standard payment processor relying on established currencies such as the US dollar and the Euro. At the time, The Libra Association only confirmed the cryptocurrency would be introduced at a later date alongside their planned digital wallet known as Calibra.
“Facebook remains fully committed to the project,” a spokesperson previously told The Verge. “Reporting that Facebook does not intend to offer the Libra currency in its Calibra wallet is entirely incorrect.” This was followed by Dante Disparte, head of Policy and Communications at the Libra Association, reassuring BBC: “The Libra Association has not altered its goal of building a regulatory compliant global payment network, and the basic design principles that support that goal have not been changed nor has the potential for this network to foster future innovation.”
When the coin was originally announced back in June 2019, Facebook used terms like “revolutionary” to describe its ultimate goal of essentially becoming its own online central bank to over 1.7 billion users across the globe. The concept was that users would be allowed to send blockchain-based, untraced, unrecognized money across the world with the same ease as sending a text message. To shamelessly quote myself: “At best, it seemed to be a technical impossibility set to be canceled. At worst, an irresponsible plan doomed for failure.” Aside from vindicating my initial assessment, this revised vision for 2020-onward shows that Facebook’s “revolutionary” project now amounts to little more than a clone of PayPal.
It’s not hard to understand why. Lawmakers were already beginning to introduce regulatory laws such as the “Keep Big Tech Out Of Finance Act,” a costly piece of legislation that could see offending big tech companies receiving over $1 million in daily fines for “functioning as communications companies, financial institutions, and issuing unaccountable currencies.” The specific proposal isn’t perfect, of course. Facebook, almost anticipating such measures, is effectively operating the currency through the non-profit status of the Libra Association, of which they’re one in a 28 member coalition.
Even still, there’s a legitimate argument to be made that Facebook is still violating this flawed standard, which would be bad business for anyone linked to the entire association. Previously, this mounting opposition resulted in Libra’s most prominent investment members — including Visa, Mastercard, and PayPal — beginning to abandon the project altogether.
“The feedback is not at all in vain, including the criticism,” argued Disparte, while speaking to the Times. “What we are trying to demonstrate is that it is now being incorporated into the project.”
“I suspect this round will be better received, but that depends on how the story is told, and the accuracy with which it is told,” Disparte continued, noting how Shopify and the financial firm Tagomi also joined Libra. He went on to explain the association is attempting to comply with at least some regulatory standards issued by the Swiss Financial Markets Supervisory Authority, working with a “college” of regulators from over 20 countries to ensure accountability. And although they’re heading into the lion’s den of EU and US regulators, don’t expect this topic to be Capitol Hill’s top story given the nature of the Coronavirus pandemic sweeping the news.
David Gerard, a cryptocurrency expert, signaled to Information Age how the white paper was a sign of how the company won’t “enter the financial market unimpeded” by oversight.
“Facebook is slowly being dragged, kicking and screaming, to running Libra like an ordinary, compliant payments processor — PayPal, but it’s Facebook — or Libra won’t be allowed to exist,” Gerard said. “The only interesting things the blockchain parts could do is workaround regulations — and there’s no way regulators will let Libra do anything like that. Libra was founded on Bitcoin dreams — but none of those aspirations will ever happen, because they contradict everything about how finance works in the real world.”