Facebook is still chipping away at the rough stone that it hopes will eventually become a highly polished stablecoin project. Despite overwhelming concerns over the ability of the social media company to responsibly manage a financial solution, Facebook still has high hopes for Libra and is attempting to act as if nothing is wrong. Like a duck on a pond, though, what’s on the surface isn’t always the same as what’s found underneath.
Libra just lost a number of its original backers, including Visa, MasterCard, PayPal, Stripe, eBay and Mercado Pago, who pulled out of the Libra Association within the past couple of weeks. According to the U.S. Treasury Secretary, Steven Mnuchin, this is because they came to their senses. He told CNBC this week, “I think they realized that they’re not ready, they’re not up to par. And I assume some of the partners got concerned and dropped out until they meet those standards.”
Those standards refer primarily to guidelines established by findings of a working group created by the G7 to explore stablecoins, BBC reported. The group determined that stablecoins, including Libra, are a major risk to the global financial system and supported its findings by providing nine different ways the projects could be detrimental.
Among those ways, the working group’s report said that stablecoins could cause issues for policymakers when they try to establish interest rates, that they could create financial instability if users were to suddenly lose confidence in the currencies and others. The report asserts, “The G7 believe that no stablecoin project should begin operation until the legal, regulatory and oversight challenges and risks are adequately addressed” and adds that rectifying any concerns “is not necessarily a guarantee of regulatory approval for a stablecoin arrangement.”
Still, the Libra Association is forging ahead. While it doesn’t have the original 28 founding members it expected to have, 21 are still said to be involved and they all met Monday in Geneva, Switzerland, to sign the Libra Association charter. Among these companies were Uber, Spotify, Anchorage, Coinbase, Vodafone, Kiva Microfunds, Lyft and Women’s World Banking.
Each member will have one vote in how Libra operates and, according to the charter, will have to recuse itself if there’s a conflict of interest. That might result in a lot of recusals, since several companies have already been said to have intertwined relationships with Facebook. However, the charter also allows members to transfer their membership to other companies “under limited circumstances,” which might make any recusal irrelevant.
None of the founding members appears to be too concerned with all the negative attention the project is being given. Spotify released a statement expressing its optimism, saying, “Though it is still in the early stages, we look forward to exploring the opportunity offered by the Libra Association to empower billions of people globally, especially in financially underserved markets.”
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