Facebook may be bad at a lot of things, but it rules in one particular area. Despite not being able to keep track of its users’ data and being the target of multiple breaches over the years, it shines at disrupting the status quo. Never before has a single company commanded the global attention on a subject like Facebook’s Libra stablecoin has, and while it is facing a great deal of resistance around the world, it is also forcing countries to reconsider their stance on digital currencies going forward.
This week saw Libra bounce back after having lost supporters like Visa, MasterCard, Stripe and more. On Monday, 21 entities signed up to be founding members of the Libra Association, although the number had expected to be 28. Notably, of all the founding organizations, not a single one is a financial firm.
Stefan Ingves, the governor of Sweden’s Riksbank central bank, recognizes what Libra has done to global finance. He said this week on Squawk Box that Libra is forcing change, even if it isn’t able to operate, and explained, “It has been an incredibly important catalytic event to sort of shake the tree when Libra showed up out of the blue, and that forced us to think hard about what we do.” This is a reference to more central banks exploring the possibility of introducing their own digital currency.
That sentiment is shared by Benoit Coeure, who is part of the board of the European Central Bank. He said in an interview with Bloomberg recently, “The nature of money will change. We’ve got to adapt so we can reap the benefits of technology.” He added, “Until recently, we’ve taken a sandbox approach to fintech regulation under which we could afford to give projects a chance and see how risks materialize. But now we have an elephant in the sandbox, so that approach doesn’t work anymore.” That elephant is Libra.
In the U.S., where the government response to Libra has been harsh, the central bank doesn’t believe Facebook is anywhere near ready to introduce a financial solution. Lael Brainard, a governor of the Federal Reserve and the chair of several committees of the organization, stated on Wednesday that Facebook has to address a long list of legal and regulatory challenges before it can even consider facilitating payments. She added, “It should be no surprise that Facebook’s Libra is attracting a high level of scrutiny from lawmakers and authorities. Libra, and indeed any stablecoin project with global scale and scope, must address a core set of legal and regulatory challenges before it can facilitate a first payment.”
Bruno Le Maire, France’s Minister of the Economy and Finance, balks at the idea of a social media company offering a financial solution. He said in a Financial Times op-ed piece, “Do we really want to give private interests such power, given the consequences it would have on trade and financial stability? I cannot countenance one of a sovereign state’s most powerful tools, monetary policy, falling under the remit of entities not subject to democratic control.”
It hasn’t all been doom and gloom for Mark Zuckerberg and Facebook—there’s at least one person in the U.S. Congress that believes Libra has a bright future. South Dakota Senator Mike Rounds recently voiced his support for Libra, stating, “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.”
Given the global sentiment, however, finding support by just one or a small handful of government officials won’t be enough to see Libra succeed.
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