Back in June, Facebook announced the launch of its Libra stablecoin, much to the anguish of the crypto community. Interestingly, regulators appear to be feeling the same way as the crypto community, with the US government pushing back against the stablecoin significantly. In another major blow to Libra, Jerome Powell – Federal Reserve Chairman – has said that Libra will be heavily scrutinized by his agency when it comes to regulation time.
Holding Facebook to a Higher Standard
Powell promised that the Fed will hold Facebook to a much higher standard and will expect Libra to be a class above the rest. There are already a number of regulated and approved stablecoins in the US – such as the Gemini Dollar – so why should the Fed be tougher on Libra? It all boils down to Facebook’s loose history with data privacy. If you give a company that has a poor history with data privacy access to people’s finances then you have a recipe for disaster.
Powell said:
Libra’s a new thing; we are looking at it very carefully. Given the possible scale of it, I think that our expectations — from a consumer protection standpoint, from a regulatory standpoint — are going to be very, very high. […] Authority for overseeing Libra is going to be in several places, but I think that the big picture is we are going to be looking really carefully at it.
Lots of Crypto Lobbying Power
If there is one thing Facebook isn’t short on, it’s lobbying power. Facebook has the power and finances to lobby the US Senate and get their own agenda pushed through, much like other major corporations do. Instead of pushing for faulty planes to be approved and regulated like Boeing seem to be doing, Facebook is more focused on the handling of personal and private data. However, if Facebook gets the green light for Libra, the crypto world now has the lobbying power of Facebook at its beck and call. If passing pro-crypto bills could benefit Libra in one way or another, the crypto community can count on Facebook’s backing.
Thanks to Facebook’s history, Libra will be heavily scrutinized. Despite the Fed issuing this stark warning, as long as Facebook plays by the book and creates a truly safe and regulated stablecoin then there should be no issue at all. In fact, it could help boost Texas’ bid to make USD stablecoins accepted tender throughout the state.
