New rules may stifle growth of Facebook's currency Libra
OPINION: All publicity is good publicity, right? If that's the case, then the Libra group will be delighted with how this week has gone.
The Facebook-backed cryptocurrency has had a rotten week in terms of press coverage.
First, Apple chief executive Tim Cook hammered the cryptocurrency while speaking with the French newspaper Les Echos. Hours later, a founding member, PayPal, withdrew its support.
Next, the Bank of England said Libra would have to meet the highest traditional banking standards to operate in the UK.
And finally, it was revealed that Facebook chief executive Mark Zuckerberg is set to face another grilling by the US congressional Financial Services Committee on October 23.
Before we go any further, it's worth a quick refresh on what the point of Libra is.
Backed by Facebook, Visa, Mastercard, Uber, PayPal (originally), Spotify and more than 20 other major global brands. Libra is a new, non-profit cryptocurrency that's available to anyone with an entry-level smartphone and internet connection.
Libra is different to Bitcoin, Etherium, Litecoin et al because it runs on a semi-decentralised network designed by Facebook's engineers. This semi-decentralised network will run on high-end servers from each of the group's founding members.
Libra also aims to keep its currency from becoming a victim of volatility by investing its capital in "stable and liquid assets".
In short, Libra is a very serious proposition. And it has the clout to be the most important digital currency on the market. One that could rival country-backed currencies, like dollars, from purchases ranging from a cup of coffee to buying a car, house or private island.
The rise of Bitcoin, which initially gained traction in the aftermath of the 2007 global financial crisis, proves there is an appetite for a non-traditional currency alternative.
This is a terrible idea, though. Well, that's what Tim Cook said this week, anyway. "I really think that a currency should stay in the hands of countries. I'm not comfortable with the idea of a private group setting up a competing currency."
"A private company shouldn't be looking to gain power this way," he said.
Cook's harsh words landed just before PayPal announced it was pulling out of the Libra organisation. Why? PayPal refused to specifically say. However, a report published in the Financial Times this week suggests PayPal backed away from the project due to concerns it held regarding Facebook having "not done enough to address the backlash against the project." Its source said, "it doesn't seem that there was a lot of pre-work done with regulators."
Riding the growing wave of bad news, the Bank of England's financial policy committee (FPC) said Libra would "need to ensure end-to-end resilience."
The committee went on to say: "If payment tokens were used widely to facilitate routine payments, they should have the same level of operational resilience and safeguarding as the use of debit cards to make payments from current accounts."
Ouch. This is a significant move, forcing Libra to meet the same high standards as the rest of the banking industry. Something that no other cryptocurrency has faced to date.
Although it needs to be said, that this was comparatively great news compared to the reaction Libra has received from France and Germany, as both countries vowed to stop the digital currency outright from operating within the entire European Union.
Lastly, there's Mark Zuckerberg's pending hearing with Congress. And while previous hearings the Facebook chief executive has attended have not been dissimilar to grandparents receiving tech support from a grandchild, this hearing has the potential to be box office-worthy.
Because it's not just technology this time. It's a threat to the US dollar too, which is basically the same as a threat to America.
Despite the foursome of bad news, the would-be digital currency tried to put a brave face on things.
The Libra Association's head of policy and communications, Dante Disparte, said: "We recognise that blockchain is an emerging technology and that policymakers must carefully consider how its applications fit into their financial system policies."
"The Libra Association and its members are committed to working with applicable regulatory authorities to achieve a safe, transparent and consumer-friendly implementation of the Libra project."
This is far from over. Watch this space.