It seems that the long-awaited Facebook crypto Libra has hit a bump on the road. There were a lot of talks concerning Libra these past few weeks. I mean, it’s a possible Facebook crypto, so it has to be the main subject of discussions in the crypto world. However, now it is the main subject but not for good reasons; the reason is instead not so good.
It seems that the US lawmakers are asking Facebook to cease implementation plans for Libra crypto. Now you might ask; why is that happening? To find out, you will have to keep reading.
Basics of Libra crypto
Let’s start the basics with what you already know. The Libra crypto is a blockchain digital currency that is in development by non-other than the social media giant Facebook. However, the project, transactions, and currency are going to be managed and entrusted to the Libra Association.
Currently, the new crypto and its network do not exist; yet. The rudimentary experimental code of the crypto has been released; the full launch is planned for the year 2020.
For now, the plan for the new crypto is it to have backing by financial assets like a basket of currencies, and the US Treasury securities so it can attempt to avert volatility. According to Facebook, every partner will inject an initial 10 million dollars. Those injections will help Libra crypto to have full asset backing on the day of its opening.
Unlike Bitcoin, which uses permissionless blockchains. Libra crypto is not decentralized. It relies on its ‘’central bank’’, which is Libra Association.
Sadly, it will not rely on crypto mining. Only members of the Libra Association can process transactions through the permissioned blockchain.
And the digital wallet that you will be able to use for the crypto; Facebook is planning to release a digital wallet, and its name will be Calibra. It will be available on Facebook Messenger, Whatsapp, and on its own app. The release of the Calibra digital wallet is probably going to be in the year 2020.
Now to not go into too much detail, you can read more about the crypto in our previous article.
Libra crypto not gaining peoples’ trust
A recent survey done by Jefferies’ shows that American users will barely use Libra crypto because they don’t trust it enough.
The survey included more than 600 respondents, and 4 out of 5 people chose ‘’Unlikely’’ or ‘’ Very unlikely’’ when they were asked if they would buy Libra. Approximately 45% of the people in the survey said that a lack of trust in Facebook is the main reason they would not buy Libra. But, if Facebook doesn’t have any access to their transaction data, then it would be a different story.
However, somebody sees a positive in this. Teck Chia, a partner at Binance Labs, said that the crypto project is a great way to raise awareness for cryptos. He said that having a company like Facebook interested in launching their own crypto is a step in the right direction for all cryptocurrencies.
A winner of the Nobel doesn’t believe in Libra
Even a Nobel prize-winning economist, Joseph Eugene Stiglitz, claims that ‘’every currency is based on trust, but only a fool would trust Facebook’s crypto.’’
He is also saying that Facebook has been earning distrust in recent years that took the banking sector much longer to achieve. Also, he fears that the crypto can possibly be a host to a shadow economy.
However, Stiglitz recognizes that the current financial system has a problem of its own. That problem is a lack of competition in payments.
First signs of the crypto are delayed
The first sign of the delay is when over 30 advocacy groups have requested that the Congress and regulators implement an official moratorium on Libra’s development; according to the letter published on July 2nd.
The same letter is addressed to Facebook, in which they are asking that they wait until Congress and regulators analyze the crypto thoroughly.
In the letter, the advocacy groups have included questions regarding Libra that they believe need answers before the crypto lunch of the crypto can proceed.
The official delay of Libra crypto
Formal suspension of the crypto came when the US lawmakers asked Facebook to ‘’immediately cease implementation plans’’ of the crypto.
The reason for the asked delay is because of the U.S. House Committee on Financial Services. This is led by Maxine Waters, who wants to thoroughly examine risks regarding cybersecurity, global financial markets, and of course, concerns regarding national security.
Libra is not the only thing they want to be on suspension; digital wallet Calibra is also in the letter of the US lawmakers.
This move was hinted by Maxine Waters last month shortly after the announcement of the project. Now Waters’s letter sent to Facebook’s CEO Mark Zuckerberg, Chief Operating Officer Sheryl Sandberg, and Calibra CEO David Marcus, makes the request from a few weeks ago formal. In addition to Waters, the letter is signed by House Finance’s subcommittee leaders.
“If products and services like these are left improperly regulated and without sufficient oversight, they could pose systemic risks that endanger U.S. and global financial stability’’, written by Waters. ‘’These vulnerabilities could be exploited and obscured by bad actors, as other cryptocurrencies, exchanges, and wallets have been in the past.”
The U.S. House Committee on Financial Services isn’t the only one that is having trouble believing in the project. Senate Banking Chair Mike Crapo is having a hearing with the Calibra CEO David Marcus on July 16th. Because of the concerns over the crypto and, of course, potential risks for data privacy. Water’s committee will have a hearing on the project the next day.
However, the Facebook spokesperson said that they are looking forward to working with the US lawmakers; which includes answering any questions that the committee has. And that, to me, shows that Facebook doesn’t believe that the hearing will cause any problems for their Crypto Project.
As Facebook’s cryptocurrency project has not gained any trust from anybody as it seems. The people don’t trust Facebook because of its previous problems with data privacy; now, the US government is having hearings regarding the exact same issues.
When it comes to my thoughts; Libra crypto on its own could be exciting new crypto if only Facebook weren’t behind it. However, I believe that they can overcome all of these problems and possibly make something good for everybody. Now, we will have to wait and see what will happen at the hearings, so stay tuned!
To not wait too long, you should check out our top 5 cryptocurrencies to invest in.