In a recent statement by Steven Mnuchin, Treasury Secretary for the U.S., Facebook may be in for some difficult times ahead due to Libra losing support. Many of the stablecoin’s most influential supporters have backed away from the project due to worries that Libra will not be able to achieve the happy middle ground between the world of crypto and fiat currencies that it was going for.
Apparently, in its current state, Libra is not yet resistant enough to money laundering practices which put the stablecoin at odds with FinCEN which is a government body tasked with enforcing money laundering law.
To avoid complications and unwanted to legal action, six of Libra’s biggest supporters have left the project until legal regulations can be met by the Libra team. Stripe, eBay, PayPal, Mastercard, Visa and Mercado Pago are now on the outside of the project looking in.
Companies like Visa are still hopeful that a resolution will come and have announced a possible return should Libra bring up their game. The main challenge Libra is facing, however, is quite monumental in nature.
Many believe that stablecoins, in general, are attempting to bridge a divide that may prove too wide in the end. The Financial Stability Board is one example and they have outlined numerous concerns in this report.
Traditional fiat currencies are created, issued and governed with certain philosophies in mind that tend to go against the grain of what cryptocurrencies seek to accomplish. Stablecoins live somewhere in the middle, offering few real advantages over their fiat and crypto counterparts. Other than faster and more cost-effective online payments, of course.
That said, many others would say that Libra is providing an avenue for the future of fiat currencies. In a world where online payments are an everyday occurrence, Libra, and others like it, do provide many benefits over traditional currencies: the main ones being the convenience, transaction price and speed.
The benefits would not come without a cost, however. Unlike cryptocurrencies, stablecoins cannot share many of cryptocurrency’s greatest benefits, like anonymity, privacy, and resistance to censorship, for fear of money laundering.
A Word of Warning
Although the Libra project shows potential to bring banking services to over 1 billion people worldwide, lawmakers are simply not yet convinced that the stablecoin is ready to meet international banking standards. In Germany and France, some officials have made it clear that they will work for a world where Libra is not currently welcome in their countries.
In the United States, senators are sending letters to partners of the stablecoin, warning of negative implications Libra is thought to bring about. In addition to that, the same senators have gone so far as to threaten partnering companies with increased scrutiny where financial regulation is concerned. Among concerns are issues related to the destabilization of the global economy, terrorism, and money laundering.
Like most game-changers, Libra is facing its fair share of hurdles. Facebook is attempting to create a global payment system that goes against tradition while utilizing traditional fiat currencies to secure its own value and stability. It is clearly a tricky balance to strike but if and when they are successful, Facebook will have created a payment system that is sure to change many things. The question at the moment, however, is whether they have the staying power to make it through the gauntlet.