Libra has been one of the controversial cryptocurrencies that surfaced ever. Regulatory authorities are giving a tough time to this project and till now it has been unable to gain the confidence of authorities as well as analysts. Maybe Libra chose the wrong time to launch its new project. Given the regulatory activities in the past few years. The governments around the globe are struggling to control the risk with decentralized currencies. While Facebook is in a bid to get approval from the authorities, it seems like authorities are unsure of its status.
On 19th Feb, the EU expressed its concerns regarding Facebook’s Cryptocurrecny Libra. It believes that Facebook is falling short in fully answering the questions of the authorities in the EU. Executive Vice-President Dombrovskis expressed in the official memo of February 19, that Facebook was unable to answer all the questions. Due to insufficient information that they received from Facebook, they are uncertain of the infrastructure of LIBRA and its relation with the EU law.
After the implementation of 5AMLD and the expected implementation of 6AMLD, the EU is not coming slow on digital financial initiatives and plans to bridge the loopholes with strict laws in the member countries. Facebook now has stricter regulations to follow.
Facebook’s previous regulatory status
Facebook’s CEO Mark Zuckerberg spoke in front of a key U.S committee back in October 2019 and tried to justify Libra. Unfortunately, even after detailed answers the authorities still didn’t show any positive attitude towards the new cryptocurrency. Also, the CEO of Facebook himself disclosed in the hearing that a quarter of the initial investors of Libra has abandoned the project.
So overall, it shows that Libra is losing its value before gaining it. If this continued the launch of Facebook’s Libra might be delayed again. Facebook needs to be very careful in its dealings with the regulatory authorities.
The infrastructure of Libra is quite unique which gives competition to crypto as well as fiat currencies. The currency will be backed by the securities with a low denomination, which makes it resemble the fiat currency. Also, it is a digital currency that would be traded on the blockchain so it resembles cryptocurrencies. And Facebook has a major share in the project and has a bad reputation regarding handling customer data. All these are the areas of concern for regulatory authorities, analysts, and competitors of libra.
What is the impact of this scenario on Bitcoin?
Bitcoin managed to stay on the top but the news related to Libra shook the value of this cryptocurrency. The day when the Facebook representative Mr. Marcus answered the questions of a committee in the U.S, Bitcoin’s price took a dive and went below $10,000. This shows that if Libra will be launched it will have a major impact on the market value and consumption of Bitcoin and other major cryptocurrencies.
To wrap up, Facebook still has not given up after repeated rejections from the regulatory authorities and it shows that it is not out of the game. So it is a point of concern for the cryptocurrencies, Fintech, and even traditional financial institutions, because what Facebook is offering is new financial infrastructure.