Facebook has encountered several potentially deadly roadblocks obstructing its proposed Libra cryptocurrency since it announced the project in June.
Libra drew immediate concerns from governments and central banks over its potential to destabilise the global financial system and undermine a nation's ability to control its currency.
Over the past few months, seven high-profile brands that were founding members of the proposed cryptocurrency's governing body, the Libra Association, have pulled out of the project, including, most concerningly, Mastercard, PayPal and Visa.
In mid-October, the G7 group of the world’s most powerful nations issued another blow to the project when it said "stablecoins" such as Libra should not be allowed to launch until the "legal, regulatory and oversight challenges and risks" are addressed.
The following week, Facebook founder Mark Zuckerberg appeared before US Congress to defend Libra, although the six-hour hearing descended into a grilling of Facebook's political advertising stance and history of data misuse than of its cryptocurrency plans.
Campaign Asia-Pacific asked some blockchain and cryptocurrency experts for their thoughts on the Congress hearing and the future of Facebook's Libra project. While they all acknowledge there are significant hurdles ahead, they are in support of Facebook's vision for a globally inclusive cryptocurrency, whether it falls to Facebook to facilitate this or not.
What's behind the cold reception that Libra has received from Congress and other regulatory bodies since it was announced?
Christel Quek, co-founder and chief commercial officer, Bolt Global: "Facebook’s entry into the crypto space was largely expected considering the platform’s overarching global reach. Politicians and financial regulators are naturally feeling uneasy given the increasing momentum that cryptocurrencies are generating and the radical opportunities that they bring.
"Central banks are naturally worried about losing monetary control over a far reaching currency that can have national and international repercussions. With Facebook holding a user base of more than two billion across its multiple platforms, Congress is also worried about the influence a single company holds on such a large population base."
Gin Chao, chief strategy officer, Binance: "The congressional hearings on Libra reveal US concerns over its ability to protect the US dollar as a vehicle to influence and enforce foreign policy, particularly with regard to sanctions and trade. However, this influence doesn’t derive from a fiat denomination [fiat is a national currency issued by a government]; it derives from the fact that the US has historically built a framework for economic development, innovation and advancement. In fact, paper fiat currency facilitates most of the anonymous transactions that tend to be scrutinised."
Do you believe in Facebook’s vision for Libra?
Colin Miles, director, NextID: "The vision for Libra is something upon which I concur: global financial inclusion using blockchain-inspired technology for the benefit of all. And I still genuinely believe that the Libra project is a hugely positive move towards this. The outcome for those creating and backing this concept has conversely been political interference of the highest order and a classic case of analysis paralysis.
"Did it matter that Zuckerberg was rich or poor? If the project works, it could save billions of dollars for people who really need the cash that is usually swiped by fee mongers. And the Libra project is still strongly supported by nonprofits Kiva and Women's World Banking, both of which have missions to help some of the most vulnerable people on the planet."
Chao: "Libra and other cryptocurrencies have the potential to create massive economic value by reducing friction and agency costs throughout legacy monetary systems and by providing equal financial access to the billions of users that have been marginalised by current banking and financial institutions."
Quek: "The current regulatory roadblock on Facebook’s plans for its digital token has certainly dimmed investor sentiment for cryptocurrencies. But I believe the natural course for our financial model is to progress into the blockchain, as well as creating a digital token to decentralise the financial systems by reducing costs and increasing transparency."
Is Facebook the correct company to facilitate this vision of global financial inclusion through cryptocurrency?
Quek: "There is understandably a bit of frustration or angst towards Facebook, especially given the Russian election interference and the Cambridge Analytica scandal. Hence there has been a degree of trust issue. That being said, Facebook, with its vast userbase from around the world, is at an exceptionally powerful position to implement a project of scale. It is, however, vital that there is competition to truly democratise the crypto-industry."
Miles: "It shouldn't matter but it absolutely does. The fact remains Facebook still only has one vote in the overall structure of the Libra Foundation, but its influence is deemed to be too great by the politicians. The spectre of Facebook leaving the Libra Foundation was raised and Zuckerberg said he would if there was no regulatory approval – and the foundation decided to go ahead anyway. It was an interesting positioning point and got a lot of people thinking this might even be the way forward, wherein Facebook's influence is less direct."
Many commentators criticised the Congress members for grilling Zuckerberg on issues unrelated to Libra. What should they have prodded him on?
Miles: "The congressional hearing was a tirade of political barbs and ill-judged, often irrelevant agenda-driven comments that became monologues without any questions. Surely this brings the financial services committee’s purpose into disrepute? The representatives of Congress couldn't really see the wood for the trees. They could only focus on their personal hang-ups surrounding political campaign activities and forgot any of the people who might benefit from Libra’s efficiencies.
"For the questions that should have come up, the panel completely failed to elicit any further detail on the internal mechanics and methodologies involved for the Libra charter members and their master nodes. A section of the white paper alluding to dividends had recently been removed, lessening the look of a profit motive and simply leaving the transaction fees to cover operational costs only. It would also be interesting to know what Kiva and Women's World Banking are actually planning to use the currency for and what scenarios they have planned for maximum human impact."
Quek: "I don’t think many can be surprised as to how Congress went about the Libra hearing after all the incidents Facebook has been involved in, which suggests Zuckerberg was fighting a losing battle before it had even started. But the hearing should have been solely focused on the Libra project and whether it can offer global financial transfer and transaction systems through an independent cryptocurrency. Instead, many of the politicians focused on whether Facebook could be trusted and, although they are right to do so, much of it felt like an opportunity to verbally attack Zuckerberg and his company, in which he was often denied the opportunity to provide a proper response before another question came in."
In the Congress hearing Zuckerberg noted the fact that China is moving fast to launch its own digital currency and blocking US-led projects such as Libra could risk the US being left behind. What are your thoughts on this?
Chao: "Blockchain and an eventual permissionless Libra ecosystem is exactly the kind of innovation that has contributed to the US’s economic strength and blocking its progress undermines the values that resulted in a US superpower to begin with. In terms of sanctions, I can’t think of a better way to enforce them than a system that is as immutable and transparent as blockchain-based currencies."
Quek: "Zuckerberg’s comments certainly stirred the pot in the ongoing issues between China and the US. He is right in predicting that the US would risk losing out leadership in the crypto space to countries such as China – whose government is keen to issue a central bank-backed digital token for the yuan and hoping for widespread international utility. But, for now, his comments will only be taken with a pinch of salt, especially after Fed chairman Jerome Powell’s comments earlier this year that he was not actively pursuing sovereign-issued digital currencies. This will only become an issue if a government’s currency starts losing its influence to an independent cryptocurrency, which will likely lead to a response of pressure and regulations."
Miles: "The Libra project was under attack by selective, tone-deaf and ignorant questioning, at a time when China massively backed its own digital currency. Only one rational voice resonated, the urbane Republican Patrick McHenry, who stated: "If history has taught us anything, it's better to be on the side of American innovation." Sadly, for the committee and for millions of unbanked, including 14 million Americans, it may already be too late."