When Facebook announced last month its intention to launch its Libra cryptocurrency, the company aimed to release the digital money in the first half of 2020. But policy experts say the project is unlikely to proceed at that pace—if at all.
“The odds that Libra receives regulatory approval anytime soon (i.e., in the next 6-12 months) are quite low,” Angela Walch, a research fellow at University College London’s Centre for Blockchain Technologies, wrote in an email to Quartz. “This is such a massive proposal, with immediate global scale and consequences, that everyone–including regulators–will need time to think it through.”
Since Facebook shared plans for Libra on June 18 it has dealt with a flood of criticism. During US Senate and House hearings last week, legislators slammed the social media giant for jumping into financial services when it hasn’t adequately addressed challenges, like user privacy and the spread of misinformation, on its existing platform. Congressmen further criticized the monopolistic nature of the Libra project. (Facebook is Libra’s principal developer. The company has also led the establishment of the Libra Association, the organization tasked with managing Libra’s network and monetary reserve.)
To be certain, nobody knows what Libra is yet (“The vision that Facebook and Libra have so far given to the world is very immature, with few specifics and quite a bit of fluff,” said Walch), but we already know that US oversight will be a multi-agency effort.
During a recent White House press conference, Treasury secretary Steven Mnuchin said his department “has expressed very serious concerns that Libra could be misused by money launderers and terrorist financiers.” A working group on digital assets that Mnuchin convened under the Financial Stability Oversight Council includes an alphabet soup of regulators. The FSOC, established under Dodd-Frank, also possesses the ability to “designate a nonbank financial firm [like Facebook] for tough new supervision to help minimize the risk of such a firm from threatening the stability of the financial system.” In essence, it could deem Facebook too big to fail. It’s unclear whether FSOC would exercise this power though—in October, the organization de-designated Prudential, its last non-bank, as a systemically important financial institution.
Regardless, if Libra’s skeptics—including a G7 working group —are to be believed, after Facebook’s latest encounter with Washington, the social media giant should probably be on the defensive.
“If anything, the hearings and events surrounding DC last week showed two main things: Facebook is an easy bipartisan target for politicians, and the road to get regulatory approval will be steep,” observed Katherine Wu, a cryptocurrency legal researcher. In addition to the Office of the Comptroller of the Currency (which President Trump alluded to in a tweet demanding banking regulation for Facebook), Wu called attention to the “myriad of other agencies”—the NY Department of Financial Services, the Department of Justice, and Federal Trade Commission—which could also declare jurisdiction over some part of the Libra network or Facebook’s Calibra wallet. Whether or not Facebook receives US regulatory approval, she said, “Facebook’s global coordination with regulators and agencies around the world is going to be tough.”
Still, Facebook told Quartz it hasn’t updated its Libra timeline.
“We know that the journey to launching Libra will be a long one and that we cannot do this alone,” said Elka Looks, a company spokesperson by email. “Engaging with regulators, policymakers, and experts is critical to Libra’s success. This was the whole reason that Facebook along with other members of the Libra Association shared our plans early.”
But even crypto exchanges doubt Libra’s aggressive timeline. “Given the regulatory landscape, the practical conclusion is that this project will remain in a holding pattern for a not insignificant period of time,” said Stephen Gregory, compliance officer at Gemini, one of the world’s largest cryptocurrency exchanges. (Gregory said he was speaking in his personal capacity, not as a representative of Gemini). If bitcoin regulation is any indication, Libra could be be in purgatory for years.
“Ten years after Bitcoin began operating, we are still trying to understand it and regulators have not figured out what to do about it,” said Walch. “In the end, Facebook and Libra are entering the high-stakes domain of money and finance—they should expect to carry a heavy regulatory burden just as others operating in this space do.”
So if you’re waiting for Libra, don’t hold your breath.
Update: This post has been updated to note Stephen Gregory was speaking in a personal capacity.
BITS AND PIECES
- Facebook’s Libra currency spawns a wave of fakes, including on Facebook itself (Washington Post)
- Inside Coinbase’s Executive Turmoil: Conflicting Visions (The Information)
- Tron founder Justin Sun postpones lunch with Warren Buffett, Sun may be under investigation in Beijing (Quartz)
- The differences between Bitcoin and Libra should matter to policymakers (Coin Center)
- Binance’s BNB token burn—why this is meaningless nonsense to fool suckers (David Gerard)
- Everyone wants Facebook’s Libra to be regulated. But how? (Wired)
Please send news, tips, and launch dates to email@example.com. Today’s Private Key was written by Matthew De Silva, and edited by Oliver Staley. There is nothing more uncommon that common sense.