The reality is obviously more difficult than Facebook expected.
Within a few hours of October 11, Visa, Mastercard, Strible, Mercado Pago and eBay announced the abandonment of Libra.
So far, six founding members have successively withdrawn from Facebook's proposed cryptocurrency Libra project. This once-influenced, once the United States authorities caught off guard, and initially joined the Libra alliance of a total of 28 companies, nowadays finally met with a counterattack from the government level, and fell into a situation of helplessness.
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Member's "threat" letter
In fact, at the beginning of the announcement by Visa and other giants to withdraw from Libra, there have been speculations that this was caused by regulatory pressure.
Earlier, Morgan Stanson founder Anthony Pompliano said that Visa and MasterCard had just withdrawn from the Libra Association. Political pressure is too great for companies to cope with. The decentralized, non-leadership model of Bitcoin is the only way to succeed in a non-sovereign global digital currency.
And similarly, VanEck director Gabor Gurbacs said: "In a way, every company that leaves Libra may be forced to do so. This is unfortunate, I am sorry that the capital market is not free. Now, you know why anti-censorship is important."
And just today, with the announcement from the US Senators to the letters of the giants, people have completely settled the speculation. However, judging from the contents of the disclosed letters, the US practice is “very American”, not only intimidating, but also provocative.
The following is the original text of the letter:
We wrote to share our deep concern about Facebook's Libra cryptocurrency project and the Libra Association. We are worried because the project still has some key questions about the risks posed by consumers, regulated financial institutions and the global financial system.
We urge you to carefully consider how your company will manage these risks before taking action. Given that Facebook has not yet proven to Congress, financial regulators, or even companies that have not yet been certified to you, it is taking these risks seriously.
Public reports indicate that potential Libra Association member companies have been working hard to get enough details from Facebook about the major risk management that Libra may pose. Although Facebook is the driving force behind Libra and provides the largest user base for this new cryptocurrency, the company has yet to provide a clear plan on how to stop Libra from financing crime and terrorist financing. This would undermine the stability of the global financial system, interfere with monetary policy, or expose consumers to the risks currently limited to qualified investors.
In fact, when answering questions about the potential risks of Libra in Congress. Facebook transfers responsibility for addressing these risks to potential Libra Association members, such as your company, and other participants in the payment ecosystem.
Facebook is currently working on a number of issues, such as privacy violations, false information, election interference, discrimination and fraud, but it does not demonstrate the ability to control these failures.
You should be aware that any weaknesses in the Facebook Risk Management System will be a weakness in your system and you may not be able to effectively eliminate these weaknesses.
These risks are not hypothetical. The New York Times recently reported a surge in online child sexual assault cases, largely due to technology platforms such as Facebook. In fact, 12 million of the 18.4 million child sexual abuse photos and videos from around the world last year came from Facebook Messenger. It's chilling to think of what happens if Facebook combines encrypted information with embedded anonymous global payments via Libra.
Your company should be very cautious in advancing a project that can foresee the growth of global criminal activity. Facebook seems to want to benefit from engaging in financial activities without having to assume responsibility for being regulated as a financial services company. Facebook is trying to achieve this by transferring risk and designing new compliance requirements to regulated members of the Libra Association, such as your company. If you take this into account, you can expect the regulator to conduct a rigorous review of all payment activities not only for Lbira-related payment activities.
We urge you to be cautious until Facebook can provide you, Congress, and financial regulators with real answers about how it will manage the significant risks that Libra brings. We also urge you to consider whether Facebook can't manage current risks from its core line of business when deciding whether to continue working with Libra.
It can be seen that in the letter, in addition to Facebook’s own problems that Members have been expounding and the problems Libra has faced, it also mentions “Facebook is trying to transfer responsibility to other members, so that the fishermen benefit”, “If you continue Persevere, then the regulator will treat it with special treatment.
In fact, the Libra Association system is the product of the compromise between the decentralization of the world and the traditional centralization system. The advantage of this system is that it can guarantee that the power will not be too concentrated, and it can also cater to the laws and regulations of each enterprise. And the US senators are only unilaterally using the most malicious malicious Facebook intentions, it is really not the United States.
The threatening remarks about "strictly reviewing payments" have already begun to emerge from the giants who have withdrawn from Libra. It is understood that the institutions that have withdrawn from this are all payment giants except eBay. The PayPal that was previously withdrawn also belongs to the payment field. Currently, the Libra Association has only PayU, a payment type company, and PayU is headquartered in the Netherlands.
In response, VanEck director Gabor Gurbacs posted on Twitter this morning, saying that many executives may choose not to try and innovate to avoid regulatory pressure. The United States can do better. He also wrote in his comments, "I am frustrated to see that members of the US Senate use regulators and actions to directly threaten the existing business of the private sector. Usually the most important regulator is an independent agency/entity, at least In theory, this is the case."
Pressure on all countries, Libra is difficult
The counterattack that Facebook faces is not only from the United States, but also from governments.
According to Reuters, Portuguese Finance Minister Ricardo Mourinho Felix expressed concern about Facebook's digital currency Libra, saying that it should not be circulated until it could resolve the risks posed by the financial system.
Ricardo Mourinho Felix said: “It’s clear from the start that Libra is a high-risk phenomenon with systemic impact.” “The important thing is that you can’t start a stable currency project like Libra until all problems are properly addressed. ” Felix stressed that Portugal is as uneasy about Libra as other European countries.
At the same time, the European Commission has already intervened and has already raised a wide range of questions for Facebook. So far, for Facebook's Libracoin program, Europe, France, Germany and other countries, as well as the European Central Bank and other institutions have remained at the stage of "questioning doubts" and have not yet conducted detailed investigations. An authoritative British media said that the European Commission has asked Facebook to answer a series of questions about Libra, including the risks to financial stability and privacy of the public data, and the company's ability to comply with anti-terrorist financing regulations and prevent criminal organizations from laundering in the future. .
Today, according to the BBC, a report from the Group of Seven (G7) warned that a cryptocurrency such as Libra would pose a risk to the global financial system. Even if Libra's supporters solve the problem, the project may not be approved by the regulator.
The report further stated that the G7 believes that any Stabilizingcoin project should not be operational until the legal, regulatory and supervisory challenges and risks are not adequately addressed. The report states that supporters of digital currencies such as Libra must be legal in their business, protect the interests of consumers, and ensure that digital currencies are not used to money laundering or terrorist organizations.
The report will be presented to the finance ministers at the annual meeting of the International Monetary Fund this week. The report talks about the entire digital currency, including Libra, rather than focusing on a project of Libra. According to the report, the “global stable currency” with the potential for “rapid expansion” will bring a series of potential problems. It is reported that the G7 Task Force writing this report is from senior officials of the Central Bank of China, the International Monetary Fund and the Financial Stability Board.
In addition to the above-mentioned government-level suppression, there are also projects within the industry that are also eyeing Libra.
At the recent Ethereum Developers Conference Devcon, blockchain infrastructure startup Wireline co-founder Lucas Geiger announced that it will fork Libra code, fork the community, and create a new cryptocurrency called OpenLibra. No token sales. There is no equity in this initiative and no company. It is reported that OpenLibra's core team includes representatives from blockchain projects such as Cosmos, Chainlink, Web3, Democracy Earth, and representatives of non-profit organizations such as the Danish Red Cross, which currently has 30 blockchain companies and non-profit organizations.
At present, there are more and more mountains in front of Facebook. Obviously, with the successive departures of partners and the joint pressure from all walks of life, Facebook has already ushered in its own dark moments. For Facebook, this may just be the beginning. All that can be done is to withstand the pressure and decide to move forward.
It is worth mentioning that in the upcoming (October 23) House Financial Services Committee, Facebook CEO Mark Zuckerberg will speak as the sole witness of the hearing. By then, we will see Libra's confrontation with regulation and the latest developments in Libra.
Original: Sharing Finance Neo