Facebook’s intentions for the world of cryptocurrencies and blockchain technology have always been shrouded in mystery as far back 2017 when Morgan Beller was placed in charge of blockchain initiatives. When David Marcus was transferred from Facebook’s Messenger service to a new blockchain division in May of 2018, rumors began to fly about a potential cross-border payment service, but when the social media giant finally made its official announcement of Project Libra in June and released its detailed “whitepaper”, the world changed, and government officials cringed at the thought.
A battle of words ensued by way of government hearings and public utterances that Mark Zuckerberg would somehow undermine the entire world of payment controls that had been constructed over the past few decades to prevent money laundering and the funding of terrorism or other activities of criminal intent. It has been an uphill battle for Zuckerberg and especially for David Marcus, the appointed CEO and lead figure for the Libra Project. Facebook had lost all semblance of trust for its misdeeds in protecting the personal information of its 2+ billion active customers. Officials have long memories.
Regulators across the major developed economies from the U.S. to the EU have drilled Marcus and Libra staff in public forums and peppered the group with a never-ending list of questions. At the same time, Zuckerberg and Marcus have sworn that Libra will go nowhere without complete regulatory approval, hopefully sometime in 2020.
Per its whitepaper, Libra is to be a stablecoin, managed by a consortium of brand name companies like Visa, Uber, and PayPal. The non-profit association, Calibra by name, is chartered in Switzerland, one of the more accommodating crypto jurisdictions in the world, and will consist of a board of over twenty members. This group will manage the “reserve pool” for the stablecoin, while the returns will cover a portion of the general costs and create a dividend stream for the members of the consortium. Due to the firestorm of controversy surrounding this project, a few initial members may step down.
The stablecoin is to be a basket of currencies, but the Libra staff has not revealed details about the makeup of this so-called “basket”, until now. According to Coindesk, Libra released this breakdown in a letter to Fabio De Masi, a German legislator and former member of the European Parliament: USD – 50%; Euro – 18%; Yen – 14%; Pound – 11%; and the Sing Dollar – 7%. Missing from the initial mix is the Chinese Yuan, which Reuters had previously suggested, since the Chinese economy is the second largest.
Why Fabio De Masi? Der Spiegel noted in a recent article that De Masi has been one of the severest and most vocal critics of the entire Libra enterprise. He has questioned the stablecoin concept from the beginning, positing that the reserves represent too tempting a pool of money to only invest in cash and cash equivalent instruments. He hearkens back to the Tether debacle where reserve funds were reportedly loaned to a sister company to cover up cash flow problems. Germany has also been a market very critical of Facebook’s mishandling of privacy issues, as well, further poisoning the well.
It is also doubtful if the Chinese government would ever want anything to do with the Libra initiative, even if only indirectly. China currently has a “quasi-ban” on most all crypto activities, and officials have publicly condemned Libra as a direct threat to their sovereign currency. Coindesk has reported that:
China views the currency as a direct threat and is developing its own central bank digital currency (CBDC) to meet the challenge posed by Libra, although the structure proposed by the People’s Bank of China (PBoC) suggests more a glorified payments system than a true cryptocurrency.
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