Facebook's Libracoin – impact on payments and regulations

On 18^th June, Facebook released a whitepaper elaborating on their new „cryptocoin" called Libra. The Libra is designed to give people financial freedom, invite everyone to the global economy making money safe and accessible. However, after years of scandals from FB's privacy faults, not everyone is eager to buy. Regulators are especially concerned delaying it further until an extremely in-depth investigation not just by regulatory bodies but also US Congress.

Libra's promised features

In their own words, FB designed Libra to address financial inclusion and problems that persist in a global economy regardless of geography. They want people to have access to money and for them to be able to receive or send money without the current high cross-border transaction fees. So, Libra will let people buy things or send money to people with nearly zero fees. Potentially, people will also be able to pseudonymously buy or cash out Libra online or at local exchange points, and spend it using interoperable third-party wallet apps or Facebook's own Calibra wallet that will be integrated into WhatsApp, Messenger and its own app.

However, Libra itself is not a stable currency. It is backed by many different securities such as the dollar, the euro and other securities that are stable on their own.

Libra is said to be made up of three parts:

• It is built on a secure, scalable, and reliable blockchain;
• It is backed by a reserve of assets designed to give it intrinsic value;
• It is governed by the independent Libra Association tasked with evolving the ecosystem.

Libra isn't just controlled by Facebook but also other founding members like Visa, Uber, Lyft, stripe, Mastercard and many others who make up the Libra Association.

All of the data is not handled by Facebook, but Calibra – a new subsidiary company that will be dealing with its crypto dealings and protects users' privacy.

This is how the coin itself works:

Regulatory concerns

Libra was almost immediately encircled by global regulatory bodies hours after being announced. Regulators cited concers regarding the cryptocurrency compromising data privacy, monetary policy, and security.

Facebook has since grappled at length with U.S. lawmakers. David Marcus, Libra chief, has even had two different hearings in Congress. Yet, Facebook and Libra are opened to work with regulators because “Engaging with regulators, policymakers, and experts is critical to Libra’s success.” (Cryptoslate)

US Treasury Secretary Steven Mnuchin also gave the Treasury’s side saying that Facebook must meet "a very high standard" before it moves ahead with Libra and added that it is a matter of “national security”.

Facebook also faces an investigation of its planned digital currency by European regulators due to competition fears. The European Commission is “investigating potential anti-competitive behaviour” and the ability for Libra to monopolise payments.

U.K. Information Commissioner, Elizabeth Denham, has also warned that because of Facebook’s previous failings with user privacy, people should be concerned about data being handled by the firm.

Bruno Le Maire, France's financial minister, published instant calls for central banks to scrutinize Libra, claiming that becoming a sovereign currency would be "out of the issue."

The Office of the Information Commissioner (ICO), data protection officers from Australia, Albania, Burkina Faso, Canada, the EU, the United Kingdom, the United States, expressed doubts about Libra regarding privacy. More precisely they stated:

Impact on payments

When or if Libra sees the light of day, it will have a big impact on technology of payments whether good or bad.

The Winklevoss twins, known for suing Zuckerberg for "stealing" their Facebook idea, said that they think Libra will have a positive effect on crypto because it demystifies the whole concept of cryptocurrencies and that it will make people feel more comfortable with the new digital currencies.

However, many experts clearly state that Libra is neither a cryptocurrency nor it will run on blockchain.

This is how Libra differs from Bitcoin:

• Libra is not decentralized – Facebook and Libra have a big control over it
• it is dependent on several national currencies
• it is not deflationary and is controlled by Libra Association
• It’s blockhain is permissioned, unlike the BTC blockchain, miners must seek approval before starting to mine

Tags: BLOCKCHAIN • CRYPTOCURRENCY • DATA • FACEBOOK • LIBRA PRIVACY • SECURITY