Facebook's cryptocurrency Libra has become the "opponent" of US monetary policy and the US dollar itself. It is based on this view that the US Congress has repeatedly failed, and now has officially urged Mark Zuckerberg to stop the development of its encryption project.
Zuckerberg will now face a confrontation with the US government and pave the way for cryptocurrency legislation. By competing with regulators to build a new financial arena, Facebook is paying a huge price for cryptocurrencies. But why? What good is this for Mark Zuckerberg?
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US Congress asks Facebook to suspend development of cryptocurrency
The US House Financial Services Committee, led by Maxine Waters, sent a letter to Mark Zuckerberg yesterday, insisting that Facebook should “stop” the development of Libra “immediately”. The letter sees Libra as a threat to the global financial system.
“These products may help create a new global financial system based in Switzerland that is designed to compete with US monetary policy and the US dollar.”
The letter also pointed out that if cryptocurrency services are not properly regulated, then a broader cryptocurrency service would “constitute a systemic risk that jeopardizes financial stability in the United States and globally”.
Zuckerberg blocks bullets for bitcoins?
However, the most important part of Waters' letter to Facebook appeared at the end. She promised to use this ban to learn more about cryptocurrencies and to begin legislation.
“When Libra is suspended, we intend to hold a public hearing on the risks and benefits of cryptocurrency-based activities and explore legislative solutions.”
In other words, the US government will eventually bring some much-needed clarity to the encryption ecosystem. But this will go through a long and painful battle, and Facebook will suffer. Mark Zuckerberg has a large pool of funds and lawyers who are taking on a bullet for the entire industry. As lawyer Jack Chevinsky said:
“For years, cryptocurrencies have been in the honeymoon period: large enough to be relevant, but not too serious to threaten the status quo. Libra may end this phase. Now we are facing serious problems, and Facebook is the only one. answer."
Bitcoin and other cryptocurrencies will develop relatively freely when Facebook deals with regulators and governments.
Facebook will not stop the Libra cryptocurrency program
Despite the strong wording of Congress, Zuckerberg is unlikely to stop developing Libra. In response to this letter, Facebook stated:
“We look forward to working with parliamentarians as the process moves forward, including answering their questions at the forthcoming House Financial Services Committee and Senate Banking Committee hearings.”
In other words, Zuckerberg is willing to work with regulators, but he will not give in.
What is the motivation of Mark Zuckerberg for Libra to fight against Congress?
You have to ask why Mark Zuckerberg wants to put himself on the punching bag of the regulator?
The first motivation is simple: Facebook will extract massive amounts of consolidated financial data from Libra. Although Facebook says the Libra Association is decentralized, node operators like Facebook will have access to transaction data. Facebook's digital wallet Calibra will also share data with Facebook under certain conditions.
Even if Calibra does not link personal transactions to their Facebook profile, Facebook can access the aggregated financial data. Coupled with the private information of 2.4 billion users, Libra is a powerful monetization tool.
Then there is power. Zuckerberg’s contest with the government is not just about making money. He is expanding Facebook's control over the most intimate areas of people's lives: money.