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Facebook’s Libra May Cause Banks to Cut Financing to the Company

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Libra

Libra

Ever since the potential launch of Facebook’s Libra was announced by the social media behemoth, the company’s cryptocurrency project has lurched from one problem to the next. Regulators from different parts of the world had voiced their concerns about the Libra cryptocurrency, and even the President of the United States slammed Facebook in one of his famous tweets.

New Trouble?

In a new development, it has now emerged that if Facebook (NASDAQ:FB) does not take care of the regulatory issues with regards to Libra, then banks might refuse to provide services to the company.

There have been fears from central banks that Libra might try to become a replacement of fiat currency, and today, the CEO of a major bank spoke about the possibility of not providing banking services to Mark Zuckerberg’s company. Ralph Hamers, the Chief Executive Officer of ING, has stated that banks might consider that step if Facebook does not comply with all the regulatory issues. He stated that if the company does not comply with regulatory frameworks, then there is the risk of criminal activity. In such a situation, banks will probably have no other option but to pull the plug.

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Hamers said, “Then we can take measures and exit the client, or not accept the client, so those are discussions you would have to have.” As everyone knows, banks are bound by stringent regulatory frameworks, and it is highly unlikely that they are going to be able to do business with a company that enters the financial system without the proper checks.

It is an understandable degree of caution from ING, and it remains to be seen if more banks come up with such statements with regards to Libra. However, it should be reiterated that Facebook had earlier stated that it is going to launch the crypto token only after meeting all the regulatory requirements.

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Facebook Libra to Be Pegged to Multiple Currencies as Stablecoin

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Libra

Libra

One of the biggest disruptions to the crypto space this year has been the announcement of Libra from the tech giant Facebook (NASDAQ:FB) back in July. The white paper published by the company about its cryptocurrency resulted in a lot of chaos and eventually led to turmoil in the crypto market as lawmakers expressed their doubts about Libra quite vehemently.

Key Updates

The company was asked to clarify several aspects of the Libra project to United States senators. In a report by one of the leading business publications, the company told Senators yesterday that the token is going to be a form of stablecoin. Unlike a traditional cryptocurrency, it is going to be backed by an algorithm, a currency, or even a commodity.

According to reports, the currencies that are going to be used to back Libra are going to consist of major currencies. Some of the currencies that will be backing Facebook Libra are the Singapore Dollar, the United States Dollar, the Euro, and the Japanese Yen, among others. The inquiry was put in place by Mark Werner, the Democratic Senator from Virginia. The company apparently put forward the list of fiat currencies that are going to back up its cryptocurrency.

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That being said, Facebook did eventually clarify that the final list of currencies that are going to back Libra is going to be finalized by the Libra Association. The Libra Association is made up of a range of entities and companies that are part of the entire project. That being said, the company went on to state that the digital currency is only going to be offered in regions after all regulatory concerns with regards to the digital currency have been cleared. It went on to state that Libra will only be offered after appropriate permission has been awarded by those in charge of the region.

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Libra Still Faces Uphill Battle Despite Softened Swiss Stance

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Libra

Libra

A Swiss government memo appears to show a softening in the nation’s stance towards Libra, the proposed digital coin led by Facebook (NASDAQ:FB), just weeks after its former president described the project as a failure.

The memo, seen by Bloomberg, shows the Swiss government refusing to rule out the possibility that Libra may one day be granted regulatory approval in Switzerland, despite major reservations being held by EU regulators. Government officials will continue to monitor the progress of the project, paying particular attention to “the form which Libra may take in the future.” 

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Libra Gets First Major Political Backer in US Congress

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Libra

Libra

Libra, the underfire planned cryptocurrency led by Facebook (NASDAQ:FB), has been dominating headlines in the world of crypto for all the wrong reasons. Regulators on both sides of the Atlantic have been staunchly opposed to the development of the coin, labeling it a threat to the economic and monetary sovereignty of nations. However, in a rare show of political support for Libra, Republican Senator for South Dakota Mike Rounds has written to Anchorage to endorse the project.

Anchorage, a South Dakota-based trust fund, is one of the 21 founding chartered members of the Libra Association, the non-profit organization that will oversee the project. Rounds described the project as an example of a technological advancement that he feels is needed to aid US consumers. “Technologies like Libra … have the potential to help unbanked and underbanked consumers right here at home […] It would be unfortunate to shun a new solution that could connect more of the most vulnerable Americans to our financial services system,” wrote Rounds.

Rounds also emphasized his belief in the importance of Congressional regulation of Libra and said he supports expanding US anti-money laundering law to cover cryptocurrency, but he was critical of the “archaic and inflexible nature of our regulatory and legal system” that drives companies to incorporate internationally. Rounds also described the negative reaction to Libra as “puzzling” and claimed that there is no legal way to define a cryptocurrency as a security, due to the fact the Securities Act of 1933 is outdated.

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It is an interesting stance from Rounds, although undoubtedly motivated by the backing of a major trust fund located in his home state. However, it will be interesting to see if Rounds’ support of Libra leads to more politicians going against the grain and also voicing their support for the project. Mark Zuckerberg is due to defend Libra before congress at a meeting of the House Financial Services Committee next Wednesday, which will be chaired by one of its staunchest critics, Democrat Representative Maxine Waters of California.

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Libra to Be at the Center of the EU’s New Crypto Regulations

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Libra

Libra

Libra will be the focus of the cryptocurrency regulatory framework planned by the European Union’s finance commissioner Valdis Dombrovskis.

“Common Approach” Needed, Says Commission VP

The former Latvian Prime Minister has been the Vice President of the European Commission since 2014 and said in his bid to be reappointed that the EU needs to take a unified approach to regulating cryptocurrencies. “[…] we must address risks such as unfair competition, cybersecurity, and threats to financial stability. For instance, Europe needs a common approach on crypto-assets, such as Libra. I intend to propose new legislation on this,” said Dombrovskis in a statement in Brussels this morning.

Dombrovskis comments come amidst intense scrutiny from senior EU politicians towards Facebook’s proposed digital coin. On Monday, the EU sent a questionnaire to Facebook (NASDAQ:FB) and the Libra Association seeking further clarification on how the coin will deal with financial stability, money laundering, and data privacy concerns. France and Germany, two of the leading EU nations, have said they will push to completely block Libra’s development in Europe.

PayPal Withdraws From Libra

The bad news keeps piling up for Libra, after it lost PayPal (NASDAQ:PYPL) as a backer on Friday. The payments firm said it would focus instead on its own efforts to “democratize access to financial services for underserved populations.” PayPal’s withdrawal comes after reports that several major backers were losing faith in the project, fearful that the spotlight placed on the social media giant’s proposed cryptocurrency will also bring their own separate, independent businesses into disrepute.

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US Regulatory Scrutiny

Libra is facing equally intense regulatory pushback on this side of the Atlantic, with senior US banking officials branding it a “monetary threat” in a meeting of the Federal Advisory Council last week. Members of the council include M&T Bank CEO Rene Jones and Brian Moynihan, CEO of Bank of America. These fears were reiterated by two members of the House of Representatives in a letter to the Fed’s chairman Jerome Powell.

After Facebook’s Mark Zuckerberg refused to provide a firm date on Libra’s launch, which was planned for mid-2020, it’s beginning to look as though the project will never see the light of day.

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International Central Banks to Question Libra Over Security Concerns

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Libra

Libra

Libra, the planned cryptocurrency led by Facebook, is to be questioned by officials from 26 central banks in Switzerland today.

Representatives from the heavily scrutinized project will face a grilling by officials from central banks, including the US Federal Reserve and the Bank of England, over the cryptocurrency’s “scope and design.” Since being announced in June, Libra has come in for significant perusal from government officials and regulators around the world due to concerns regarding the security of the Facebook-led coin.

Libra to Be Blocked in Europe?

Today’s meeting of the Committee on Payments and Market Infrastructure, a forum for central banks under the Bank for International Settlements, will be chaired by French ECB board member Benoit Coeure just days after the French Minister of the Economy and Finance pushed to block the development of Libra in Europe. The findings of the committee will be submitted to a meeting of the G7 nations in October.

“Stablecoins are largely untested, especially on the scale required to run a global payment system. They give rise to a number of serious risks related to public policy priorities. The bar for regulatory approval will be high,” said Mr. Coeure following a meeting of EU finance ministers in Helsinki on Friday. However, he did offer some hope for the stablecoin, adding that Libra “has prompted fresh thinking on how to improve our payment systems.”

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Co-Creator of Libra Responds

David Marcus, co-creator of Libra and current head of facebook’s Calibra, responded to the objections raised by Bruno Le Maire, the French Economic Minister, in a Twitter thread today. He countered Le Maire’s claims that Libra posed a threat to countries’ economic sovereignty by pointing out the fact that it is backed 1:1 by a basket of strong currencies—which means that for the coin to exist, there must be an equivalent value in reserve.

Given the intense scrutiny Libra has come in for since its announcement, it will be interesting to see where the project goes in the next few months.

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Libra Co-Founder Says It Isn’t Competing With Fiat Currencies

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Libra

Libra

Libra co-founder and chief economist of Calibra Wallet Christian Catalini has attempted to clear up misconceptions in relation to the planned digital coin in an interview with CNN’s Julia Chatterley.

The release of the whitepaper on Facebook’s (NASDAQ:FB) proposed coin back in June prompted massive debate from politicians around the world, most of which vehemently oppose the plan as they feel it poses a threat to the economic sovereignty of nations. Catalini has attempted to allay some of those concerns by saying that Libra is, at its most basic, a payment network that will allow for seamless and cheaper international transactions while also supporting several other services, such as the Calibra wallet.

Catalini also said that the overall aim for Libra is to provide banking services for unbanked and underbanked global citizens while adding that the increased transaction fee associated with the traditional financial system was also a contributing factor. He was also pressed as to whether the massive scrutiny leveled at Libra had deterred those behind the project, but said that he had anticipated such a reaction and that the association expected widespread criticism from regulators.

Despite believing that the majority of the controversy comes from Facebook’s involvement with the project, given the company’s shady history of data gathering, Catalini remained hopeful and said that “regulator’s scrutiny is productive. It helps us to think through about the challenges the project would face if successful in the future.”

Importantly for regulators, when quizzed on the subject of whether or not Libra is competing with traditional fiat currencies, Catalini said that because the project is a payment network, it will simply integrate traditional currencies into the platform so that transactions can be completed with them.

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Earlier this month, it was reported that the Libra testnet has surpassed 51,000 transactions since it was reset in September, with 34 projects having already been developed on the network. It remains uncertain as to when the platform will officially be launched, but it is believed that the Libra Association is aiming for a mid-2020 release.

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Mark Zuckerberg to Testify Before Congress Over Libra

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Libra

Libra

Facebook CEO Mark Zuckerberg will defend the proposed Libra cryptocurrency in a testimony before the House Financial Services Committee on October 23.

The highly scrutinized proposed cryptocurrency, which is being led by Facebook (NASDAQ:FB), has come under fire from regulators on both sides of the Atlantic due to its potential threat to monetary sovereignty. Now, Zuckerberg must defend the plans before US lawmakers for a third time when he speaks at a hearing entitled “An Examination of Facebook and Its Impact on the Financial Services and Housing Sectors.” Previously, Libra had been debated during meetings of the House Financial Services Committee and the Senate Banking Committee in July.

The committee is chaired by Maxine Waters, a Democrat from California, who drafted the “Keep Big Tech Out of Finance Act,” which aims to prevent online platforms with an annual revenue of at least $25 billion USD from either becoming or affiliating with financial institutions, as well as preventing them from issuing their own cryptocurrencies. While this bill is clearly targetted at Libra, analysts have been critical of the more far-reaching effects it may have. Arcata described it as a “knee-jerk reaction to Libra [that] could have an impact on blockchain adoption more generally.”

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Libra has been a hot topic of conversation in Europe as well. Valdis Dombrovskis, who has recently been appointed Executive Vice President of the European Commission, said in his bid for that role that the EU needs to take a common approach towards designing regulations for cryptocurrency. He singled out Libra in particular, saying “for instance, Europe needs a common approach on crypto-assets, such as Libra. I intend to propose new legislation on this.”

Libra was dealt another major blow today after eBay, Stripe, and Mastercard all withdrew from The Libra Association, the consortium of businesses backing the project. Their withdrawal comes just days after PayPal backed out of the project, adding further doubt as to whether the project will ever come to fruition.

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Bitcoin Could Rebound if Facebook’s Libra Hearing Goes Well

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Bitcoin

Bitcoin

2019 has been an excellent year for Bitcoin (BTC) after the poor year in 2018 had instigated many to write off the cryptocurrency, and by extension, the crypto space altogether. The cryptocurrency went on a highly impressive run this year and almost replicated the sort of rally that it had enjoyed back in 2017.

However, the past few weeks have not been particularly great for a variety of reasons, but the biggest issue is the one related to Facebook’s cryptocurrency Libra. The company’s plans to launch its own cryptocurrency at some point next year was initially welcomed by the crypto space, but since then, things have not quite worked as well as one would have thought.

Libra Faces Criticism

Over the past week, Libra has come under attacks from some of the most influential figures in the global financial elite, and that has resulted in sustained bear tendencies in the market. The price of Bitcoin dropped as well, along with the prices of all the altcoins. Jerome Powell, the head of the Federal Reserve, spoke about his reservations about it and so did the United States President, Donald Trump. Bitcoin has fallen from its highs of $13,000 to levels below $10,000 today, and experts believe that the rise in price is going to be tied to Facebook’s Congress hearings that are going to end on Wednesday.

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It has been revealed that on Wednesday, David Marcus, the head of the Libra project at Facebook, is going to be grilled by the Senate Banking Committee on Tuesday, and the following day, he will need to field questions from the House Financial Services Committee. Experts believe that the doubts and uncertainties over the future of Libra are weighing heavily on the price of Bitcoin. If Facebook’s cryptocurrency manages to come out of these hearings without a lot of damage, then there is hope that Bitcoin could rise in price again.

At the time of writing, Bitcoin is looking very weak and now down 11% at $9,680.

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Libra Should Not Scare Central Banks, Says Facebook

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Libra

Libra

Libra, the cryptocurrency that is expected to be launched by Facebook (NASDAQ:FB) in 2020, has proven to be the biggest disruptor in the crypto sphere since June. Policymakers, central bankers, and even politicians have expressed their skepticism with regards to the project.

Relief for Crypto Traders?

The announcement in July created massive disruption in the crypto market, and it was around that time that Bitcoin lost its momentum. That being said, the troubles for Libra are not over yet as fresh fears have been raised whether the Facebook-backed stablecoin is going to undermine the US Dollar and other sovereign currencies or not. Due to this development, Facebook has again been pushed on to the back foot.

Some of the concerns in addition to its effect on traditional fiat currencies include data privacy issues of users and the fact that the token could be used for criminal activities. Considering the fact that the company has been in the middle of a data privacy storm for some time, it is only natural that regulators believe that Libra might end up compromising its users. However, the company has stated that the project is being headed by numerous participating firms, not just Facebook itself.

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Some of the most important people from the Libra project eventually took to Twitter in order to clear the air about the whole thing. The head economist of the project stated in his tweet, “All of the design of Libra is really around being a complement of fiat [currencies], not a substitute.”

Despite the recent misgivings from regulators in different parts of the world, Facebook has stressed that the cryptocurrency will only be launched after it has been cleared by all relevant regulators all over the world. It also stated, several months ago, that Libra might not actually be launched next year at all.

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