Industry challenges scrutiny of Facebook’s Libra, cryptos

Read time 7min 10sec

Players in the crypto-currency space say it is clear to see there are lots of misconceptions about digital currencies, even in the upper echelons of government.

This follows the attacks on Facebook’s proposed Libra digital currency by the US Senate as well as president Donald Trump.

On Tuesday, Facebook’s head of blockchain projects, David Marcus, appeared before the US Senate Banking Committee to explain Facebook’s Libra project.

This after the social media company last month shared plans for Calibra, a newly-formed Facebook subsidiary, whose goal is to provide financial services that will let people access and participate in the Libra network.

Just hours after Facebook announced its new Libra crypto-currency project, US federal lawmakers issued warnings to the social media platform, requesting the project be put on ice until they have had a chance to review it.

Facebook’s plan for a crypto-currency came under further attack at the US Senate hearing, with politicians calling the company “delusional” and not to be trusted. Some lawmakers voiced concerns about Facebook’s previous privacy scandals as a major reason why they couldn’t trust the social network with their bank accounts.

Facebook was then told to clean up its house before launching the new business model.

Last week, Trump also slammed digital currencies such as Bitcoin and Facebook’s Libra, saying he is not a fan, as they are not money, and their value is highly volatile and based on thin air.

Mistaken beliefs

Responding to the attacks, Marius Reitz, general manager for Africa at crypto exchange Luno, says: “The comments mirror a lot of the current misconceptions about crypto-currencies, particularly those relating to illegal activity and volatility.”

For example, he explains the nature of the blockchain technology that underpins crypto-currencies means every transaction is recorded, immutable and traceable to a human being, making it one of the worst tools for criminals looking to keep their identity anonymous.

On the issue of volatility, Reitz says there is a long list of crypto-currencies, including Facebook’s Libra, that are pegged to the US dollar and other tangible assets that make it easier to regulate their value.

“Libra’s connection with established financial institutions also highlights its validity as a means of exchange.”

When announcing Libra, Facebook said the group behind the crypto-currency is the Libra Association, which has 29 founding members, including some big names like Visa, MasterCard, Uber, Lyft, eBay and Spotify.

Farzam Ehsani, VALR CEO and co-founder, says unfortunately, criticisms generally stem from a lack of knowledge of the crypto ecosystem and evolving nature of money in history.

“We are moving to a more unified world. Our current financial system divides humanity based on arbitrary and historical borders. Crypto-currencies recognise the unity of the human race and transcend the man-made boundaries that divide us. This is a force that is best harnessed rather than opposed. It is a shift that can’t be stopped, although many vested interests will try.”

Ehsani points out the irony is that when the US president – the most powerful political position in the world – comments on Bitcoin and crypto-currency, it’s a strong indication that this is a force that has already made its mark and will strengthen, regardless of the content of the comment itself.

“I’d encourage lawmakers to experience the technology for themselves first and not rely on what others are saying. When we have more education amongst regulators and lawmakers, we’ll start to see a financial system that better serves the needs of humans across the globe. Our current system is lamentably defective.

“At the end of the day, we’re one human family and we need a financial system that recognises this. Our current financial system was devised for a world with boundaries. In a world where those boundaries are coming down through advancements in communication, transportation and technology overall, it’s time that our financial system caught up with this trend towards the unification of the human race,” Ehsani says.

Welcome criticism

Alan Robertson, YOU# co-founder, says any criticism, not just constructive, is welcomed and assists the broader community to build and spread the understanding of crypto-currencies even further.

“One has to be open-minded when it comes to criticisms from any quarter – even Donald Trump, whom I would bet could not describe at the most basic level what a crypto-currency or blockchain is. Of course, that won’t stop him from having a ‘bad, really bad’ opinion of it.

“For those of us that are crypto ‘disciples’ and can only see a future world where we exchange and hold value using decentralised, peer-to-peer digital currencies that aren’t controlled by central authorities, despotic governments and outdated financial systems, it just seems counter-intuitive, but we have to guard against confirmation bias,” says Robertson.

He points out Trump’s criticisms of Bitcoin can only be positive for Bitcoin since they are quite clearly a predictably hysterical reaction to something he doesn’t understand.

“For the president to say Bitcoin is not money and that its value is ‘highly volatile and based on thin air’, demonstrates his ignorance – and of course, even his supporters can see that.

“George Mc Donaugh in a post for The Merkle aptly described ‘money’ as being context-dependent when he said: ‘Cigarettes are money in prisons, bullets are money in war zones and Bitcoin is money in Venezuela.’”

Robertson notes the fact is that in 10 years from now, carrying government-issued paper in our wallets along with little round metal coins will seem as antiquated as fax machines and typewriters are to youngsters today.

However, Roberston says while it is easy to trivialise the role of lawmakers around the world, it is their job to ensure legislation continues to evolve to protect citizens and the integrity of the state.

“That said, crypto-currencies are not an incremental shift from cash; they are as revolutionary as the Internet was in the 1990s. Therefore, lawmakers will have to go right back to the fundamentals of who controls the issuance of tender, decides on the amount of money supply, and oversees exchange control. They will find the current system was already in need of an overhaul long before Satoshi Nakamoto drafted his famous white paper.”

High-profile scrutiny

Independent financial advisory firm deVere Group is bullish about the hearing, saying it will boost the crypto sector and underscores that digital currencies are now mainstream.

“The high-profile scrutiny of this new crypto-currency must be championed as crypto-currencies are already part of the global financial system,” says Nigel Green, CEO of deVere.

“They are here to stay and their influence is set to grow exponentially. As such, they should face the same scrutiny and meet the same standards and requirements as the rest of the financial system. This is a step in the right direction for establishing a robust global regulatory framework for the wider crypto market.”

Green points out regulation is necessary, as it will provide further protection for the growing number of people using crypto-currencies.

“Whatever you think about Facebook's Libra as an individual crypto-currency, these top-level US governmental hearings underscore again that, as a concept, digital, global, borderless currencies are now a part of mainstream finance, and increasingly so.

“This is why most major financial institutions, tech giants, and of course, institutional and retail investors are increasingly involving themselves in the burgeoning sector.”

Following Trump’s Bitcoin comments last week, Green comments: “I agree with Mr Trump that Facebook’s new Libra project should be scrutinised.

“But, being the social media monolith that it is, it is surely expecting this level of scrutiny. I would suggest it is prepared for it, has the resources for it, and will welcome it, as it will make its crypto-currency stronger.”

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