Libra wars: why the main cryptocurrency partners abandons the project
Over the past couple of weeks an ambitious cryptocurrency project Libra by Facebook lost it’s several key partners. Firstly, funding was suspended by Mastercard and Visa. After that, payment giant PayPal completely left the project. The logical question of anyone, who involved in the payment sector — what’s happening? How such global and huge Facebook can be rejected with the project at the pre-launch stage?
Two days ago Mastercard gave an official comment on the situation. If we reduce this to one thesis — cryptocurrencies are required to comply with all laws and rules. This includes measures against money laundering and work within the country’s economic structure. And here we have things in Libra large corporations aren’t quite satisfied with.
What about regulation?
Libra is not just another Bitcoin, but a tangible global financial structure. I talked about it as much as possible in my blog earlier. Libra has a central regulatory authority (collegial, in fact). And the number of it’s participants has seriously suffered in these few weeks. But here’s the trouble — Libra have payment systems in this collegial thing — but no banks. Strange, but understandable: banks are subject to regulation from the Central Bank of the country in which they are registered. And now let’s look from the position of any Central Bank: a global financial structure with potential billions people of coverage wants to seem like a small startup and not fall under regulation. Of course, they don’t like it.
Libra and countries
With Libra, Facebook wanted to solve the issues of anonymity and convenience for everyone. But not on the scale of a mobile bank, as others did, but in the format of a worldwide cryptocurrency as a service with one-tap actions in the application. And who will agree to this?
Definitely not regulators in well-developed countries. Again, I give the statement of the Senate and the US Securities Regulatory Commission as an example, in which any development on Libra should be stopped until a full evaluation is completed.
Mastercard, Visa, PayPal are companies with an understandable history, a serious reputation. They’re working all over the world, which means they somehow interact with the Central Banks of the different countries. None of such companies wants a conflict with Ukrainian, British or German regulators. Their main income depends on successful work in countries. Libra, on the other hand, exists outside borders, compliances and control, which in the eyes of the Central Banks and special services is the main danger.
It’s hard to imagine what awaits Libra. But here I see two options. The first –
Facebook cryptocurrency will go the same way and will have a semi-legal status. This is not an option for Facebook’s reputation and worldwide scale. The second — they will accept the requirements of the regulators, but at the same time lose their main “cool thing” for the customers. This option is more realistic and guarantees Libra the status of “another crypt on the market”, but not the market leader.