As countless eyes watched and followed the recent U.S. congressional hearings regarding Facebook-backed cryptocurrency Libra, it was evident that it will not be easy for the social media giant and the Libra Foundation to find a way of convincing the regulators of the merits their product could bring to the world.
David Marcus, head of Facebook’s Calibra wallet that is built on blockchain technology, who has long been a leader in the centralized digital currency space, testified before the Senate Committee on Banking as well as the House Financial Services Committee. When asked challenging questions about Facebook’s plans for its Libra digital currency, Marcus mostly assured the lawmakers that Facebook would not be moving ahead with Libra until all regulators were satisfied with the plan.
In spelling this out, Marcus actually highlighted the difference between the stalled, permissioned digital currency “innovation” that Facebook wants to do and the continuous development and growth of Bitcoin (BTC) over the last decade. The crypto community had met this notion and the hearing in general with mixed reactions.
The U.S. government doesn’t trust Facebook’s Libra
It’s understandable that the government is worried about an international tech conglomerate attempting to issue a fiat-backed digital currency that could theoretically see more use than government-issued fiat currencies. It’s almost as if the U.S. government was trying to take notes from Facebook in the congressional hearing on Libra. Bitcoin and the establishment of nonstate-controlled currencies has been out in the wild and continuing in earnest since 2009; however, it’s only with the supposed entrance of Facebook into this space that the American government has suddenly been forced to quickly get up to speed on the potential behind cryptocurrencies.
It’s still unclear whether Facebook was able to allay any of the government’s fears and the timeline for Facebook’s digital currency is still similarly hazy, given the pushback as well as official government reactions. Facebook’s monolithic nature, especially juxtaposed with recent reported privacy violations that have also warranted congressional hearings, has epitomized the community’s distrust of centralized money. Fred Ersham, a co-founder of the exchange Coinbase, summarized Facebook’s impossible task on Twitter:
“Summary of DC’s reaction to Libra:
Congress: ‘Privacy violations appalling! Collect less user information. We’re not comfortable.’
Treasury: ‘High risk of money laundering! Collect more user information. We’re not comfortable.’”
Facebook has a monumental task to satiate all the seemingly contradictory concerns brought up by Congress. However, Bitcoin and other truly decentralized cryptocurrencies are already moving the needle without permission. In fact, many members of Congress simply took the opportunity to rag on Facebook. In doing so, the politicians revealed that they are generally not industry experts when it comes to crypto. There were, however, several congressional members that had made a point to learn about Bitcoin and decentralization in order to better serve their constituents. For example, when talking about the inevitability of a world built on digital currency, Rep. Patrick McHenry did articulate this view: “The world that Satoshi Nakamoto envisioned and others are building is an unstoppable force. We should not attempt to deter this innovation.”
There are better digital currencies already out there
Lawyer Jake Chervinsky articulately summed up the guarded enthusiasm that cryptocurrency believers felt while listening to Facebook talk about its centralized digital currency to the government in a tweet:
“In a way, we couldn't have asked for a better company to get Congress thinking about these issues. We now have a perfect opening to say: ‘Interested in improving payments infrastructure, but don't trust Facebook? Let us show you the far superior, trust-minimized edition.’”
On the popular podcast “Unchained,” Laura Shin spoke with CoinCenter’s director of research, Peter Van Valkenburg, about the congressional hearing on Libra and concluded similarly, thinking that the hearing did more to educate politicians on decentralization than it did to allay fears about Facebook’s bid to be the new International Monetary Fund. The same way that large conglomerates like Facebook, Telegram, etc. all are inevitably seeking to enter the digital currency space, Bitcoin and decentralized cryptocurrencies are simply trudging along without the ability for anyone to definitively speak to its future in front of Congress the way that Marcus did.
Some in the industry pointed out that Facebook’s ideas are based on previously existing blockchain consensus algorithms. Da Hongfei, founder of Neo, which allows its community to create digital identities to digitize assets and automate the management of digital assets, tweeted as such:
“Libra made a wise choice with its consensus mechanism which NEO happened to make 4 years ago.”
He also spoke to Cointelegraph regarding his views toward Libra, stressing that it would be interesting how companies in China will respond, saying, “I’d be particularly interested if any Chinese companies join in the Consortium.” He also noted there wasn't anything too surprising about the hearings, as he expects interactions between blockchain industry and regulators will increase as enterprise adoption of blockchain accelerates.
Jenny Shaver, the chief operating officer at Salt, a Colorado-based crypto firm that offers USD, stablecoin and crypto loans, told Cointelegraph that the Libra hearings could help bring awareness to the cryptocurrency industry:
“The industry has been lacking a consistent set of rules to abide by, and for the long-term development of the industry, we need to shape that structure with regulators. It is important now to put our best people in the industry forward to represent us. As a next step we should divert more resources towards lobbying, and building strategic PR and communication programs to educate all stakeholders and help remove unwarranted stigmas.”
Bruce Pon, co-founder and board member of Ocean Protocol, a data sharing ecosystem, told Cointelegraph in a phone conversation that he doesn’t think Facebook has earned the trust of the blockchain community:
“It's good that a large company recognizes the value of blockchain. It's good that we have more people through the Facebook platform, who will be exposed to blockchain, Bitcoin and Ethereum. The part that I'm concerned about is, what is Facebook going to really do with the data? Are they actually going to usurp national laws in a way that steals people's data or disenfranchises people? Are the hundred consortium members going to be this super group, who essentially control the flow of information, both transactions and data and our social graph in a way that we don't really foresee now, and given Facebook's track record — it’s not that I'm not optimistic, but a lot of people are skeptical.”
Ocean Protocol founder, Trent McConaghy, once wrote a blog post called “Tokenize the Enterprise,” describing how through tokenizing Facebook and sharing those tokens among all the stakeholders, including Mark Zuckerberg, would allow people to have a say in how the platform is developed. McConaghy wrote:
“It would be a step in truly saying we are going to decentralize Facebook, we’re going to change the mode of operating, we’re going to make it your platform, and we are going to tokenize it so that anybody can own a piece of Facebook.”