Remember Libra, Facebook’s game-changing cryptocurrency? It’s still being worked on by the company’s crypto-engineers, who are ready to deploy what could be the next “world currency.”
And this morning, after months of regulatory delays, Mark Zuckerberg is finally speaking to congress about his new “stablecoin” – a term used to describe cryptocurrencies that (intentionally) do not fluctuate in value.
To Zuckerberg (and scores of crypto enthusiasts), Libra will solve several major problems that are inherent to fiat currency (dollars, Euros, etc.) and the modern banking system.
“People pay far too high a cost — and have to wait far too long — to send money home to their families abroad. The current system is failing them,” he said in his prepared testimony.
“The financial industry is stagnant, and there is no digital financial architecture to support the innovation we need. I believe this problem can be solved, and Libra can help.”
When asked about the cryptocurrency’s viability, Zuckerberg candidly responded:
“I actually don’t know if Libra is going to work.”
He’s absolutely right; the whole project is a completely new venture, and not only for Facebook. The Libra Foundation, a collection of companies and non-profits (including Facebook), has become its own entity. Even if Facebook withdraws from the foundation, Libra could persist.
Of course, its chances of survival would diminish greatly. Facebook is lobbying hard, “donating” heaps of cash to drum up support for the stablecoin.
Without that money, Libra may quickly be forgotten. And don’t forget; it doesn’t even exist yet.
But to some members on today’s committee, Libra (and by proxy, Facebook) is pure evil.
Rep. Ann Wagner (R-MO) – along with several others – used this morning’s hearing to take shots at Zuckerberg and his company. She claimed that Libra’s end-to-end encryption could provide a safe space for sex traffickers online – an issue that she’s championed in the past.
Wagner has no idea what she’s talking about, of course, but that didn’t stop her from asking questions as if she was an encryption expert. From an outsider’s perspective, it looked like Wagner was simply trying to score “brownie points” with voters, taking the hearing way off-topic in the process.
The rest of the committee piled on, grilling Zuckerberg for Facebook’s past sins – things the company already paid through the nose for via record-setting penalties.
It all built up to the following narrative:
Can Facebook be trusted to run a major digital currency?
And again, in assuming this was the key issue at the heart of it all, the committee missed the mark. The Libra Foundation, of which Facebook is essentially a board member, will be making the decisions. Not Zuckerberg.
Yes, Facebook would gain greatly from Libra, as it would first exist within Facebook’s ecosystem. But overall, the council overseeing the new cryptocurrency is made up of many members, diluting how much sway Zuckerberg & Co. truly have.
So, if anything, today’s hearing hasn’t proven whether the Libra project is viable or not. Instead, we learned just how confused politicians genuinely are about the whole ordeal – something that worried Rep. Patrick McHenry (R-NC), the ranking member of the House Financial Services Committee, before the hearing began.
“My fear is that we now have American innovation on trial by policymakers here in Washington because they don’t understand it,” he said on CNBC’s Squawk Box this morning.
“Because they’re a big company doing this type of innovation, you have American policymakers trying to pounce on them. This also sends a chilling signal to innovation in the United States.”
And as it turns out, McHenry was right on the nose with his prediction. Zuckerberg fielded questions about anything and everything related to Facebook, Libra be damned.
Does it bode well for Libra moving forward?
Not really. So long as lawmakers and regulators refuse to actually educate themselves on crypto, progress will be slow-going.
And for crypto speculators, that’s not only frustrating but disappointing as well. Bitcoin dropped dramatically in response to the hearing, as it became quite clear that Congress can’t wrap its head around a technologically complex issue.
Now, that doesn’t mean Libra is dead in the water. Eventually, a stablecoin will start to replace fiat currency.
It’s just that it might take a bit longer than most people initially thought.