The plans for Facebook (NASDAQ: FB) to introduce their digital currency Libra have faltered. In the last few days, an majority of major supporters withdrew over security concerns
The G7 voted unanimously that Libra, Facebook’s cryptocurrency will not go ahead until it is safe and secure for use.
The social media giant faced tough scrutiny as the worlds superpowers claimed that Libra would pose risks to the global financial system. Nine major risks were identified by the introduction of Libra.
Whilst Facebook may try and appease global economies, the tougher test may be battling with regulators for implementation.
Many of the worries spawned from loopholes, where Libra was not ‘legally sound’ as it failed to protect consumers, and ensure that coins are not used for money laundering or funding terrorism.
The French Government has already stated they would block Libra use in Europe. The draft report says “The G7 believe that no stablecoin project should begin operation until the legal, regulatory and oversight challenges and risks are adequately addressed”.
Stablecoins like Libra differentiate from other cryptocurrencies such as Bitcoin (ETR: ADE) as they are pegged to global currencies such as the Euro or Pound.
The future of Libra was put into question over the weekend, when many supporters withdrew over security concerns.
On Monday, both Mastercard (NYSE: MA) and Visa (NYSE: V) withdrew their support, hampering the likelihood of Libra being implemented.
This follows the longlist of firms who have lost faith in the new Stablecoin currency, other firms of note include Paypal (NASDAQ: PYPL), Ebay (NASDAQ: EBAY) and Stripe.
However, Ebay have said they respect the Libra project “However, eBay has made the decision to not move forward as a founding member. At this time, we are focused on rolling out eBay’s managed payments experience for our customers.”
Whilst Visa added “We will continue to evaluate and our ultimate decision will be determined by a number of factors, including the Association’s ability to fully satisfy all requisite regulatory expectations.”
A spokesperson from the Libra Association said ““We appreciate their support for the goals and mission of the Libra project. Although the makeup of the Association members may grow and change over time, the design principle of Libra’s governance and technology, along with the open nature of this project ensures the Libra payment network will remain resilient.”
Many have put into question whether they would trust Facebook with their money, with the bad reputation of Facebook being highlighted recently.
The original intention of Libra was to allow people reduced transaction costs, and aid people without bank accounts.
The problems with Facebook’s libra have attracted high profile US Politicians following the commencement of 2020 election campaign.
Senator Elizabeth Warren, has said “What would really ‘suck’ is if we don’t fix a corrupt system that lets giant companies like Facebook engage in illegal anti-competitive practices, stomp on consumer privacy rights, and repeatedly fumble their responsibility to protect our democracy,”
Senator Schatz and Brown also added “Facebook appears to want the benefits of engaging in financial activities without the responsibility of being regulated as a financial services company,” showing the concerns that Libra could be used for illegal activity.
When Libra was announced back in June, plans were stated to grow from 27 member companies to over 100 in 2020. After recent events, membership has fallen to 22.
In a public statement, head of Policy and Communication Dante Disparte commented ““We are focused on moving forward and continuing to build a strong association of some of the world’s leading enterprises, social impact organizations and other stakeholders to achieve a safe, transparent, and consumer-friendly implementation of a global payment system that breaks down financial barriers for billions of people. We look forward to the inaugural Libra Association Council meeting in just 3 days and announcing the initial members of the Libra Association.”
Mark Zuckerberg, Facebook’s Chief Executive is due to appear in front of the House Committee on Financial Services on 23rd October to discuss concerns of Libra, where the future of Libra will be discussed.
It is clear that Facebook and the G7 are miles apart in the support of Libra, there is still much work to do, much research to gather and much evidence to present.
Certainly the withdrawal of Visa and Mastercard will not help the cause and may deter the global economies in the support of Libra.
With many US Politicians also coming out stating resentment for the newly found cryptocurrency, for once the tables have turned with Facebook on the underside.