If nothing else, Libra has given those bored to tears by constant Bitcoin price predictions something else to focus their attentions on. Ever since Facebook announced Libra this past June (2019), it has been all some people can talk about. Such talk is not likely to come to an end until Facebook decides that their project is actually ready to launch. In the meantime, the Libra obsessed have plenty of new stories to keep them busy.
The most recent Libra news begins with PayPal's announcement that they are bowing out of the project. The announcement came less than two weeks before members of the Libra Association were scheduled to meet and approve the Association's charter. Other interesting stories include U.S. lawmakers asking more Association members to bail, an effort by Facebook to ramp up its lobbying efforts and plans to fork Libra should it ever get off the ground.
It certainly is an exciting time to be a fan of Facebook and its grand vision of cryptocurrency superiority. Even if you are not a Libra fan, following the news is at least entertaining. With that said, let us talk about those stories that have come across the news wires in recent days.
1. PayPal walks away
Key to the implementation of Libra is the monetary and policy input of Association members. Facebook appeared to have scored big by lining up some very impressive names including Visa, MasterCard, and PayPal. PayPal's support was especially helpful due to the fact that the company has long been a pioneer in online payment systems. People already familiar with PayPal would theoretically be more accepting of Libra.
All of that is now up in smoke with PayPal's announcement that they are walking away from the project. In an e-mail sent to journalists in early October 2019, PayPal made it clear that they would no longer be participating in the Libra Association. It must be assumed that they are taking their financial backing with them.
Though the e-mails did not give a specific reason for PayPal's change of heart, there may be a clue in the following sentence: "PayPal has made this decision... as we strive to democratize access to financial services for underserved populations."
It would appear as though PayPal executives are uncomfortable with how the Libra Association will be controlled in the short term. As you might already know, the Association is not supposed to be fully independent for at least a few years. Even at that, there's speculation as to whether or not Facebook will ever completely relinquish control over the Association.
Facebook's influence over the Association has been a sticking point from the start. Critics have rightly claimed that Libra can never truly be decentralized as long as the Association has any ties to Facebook. Perhaps it just took PayPal executives a few months to come to terms with that reality.
Afraid of government scrutiny
PayPal's change of heart might be due to fears of government scrutiny more than anything else. Within weeks of Facebook's Libra announcement, there were plenty of rumors suggesting that governments around the world would be looking more closely at how Facebook does business. Those rumors were followed over the summer by more rumors suggesting Association members might not be willing to open themselves up to additional scrutiny.
PayPal has long enjoyed financial success wherever its services are available. They have managed to build a loyal customer base and a strong business model, all while keeping regulators smiling and happy. Why upset the apple cart now?
2. Lawmakers asking others to bail
Fresh on the heels of PayPal's announcement, two America lawmakers have called on a number of Libra Association members to bail out as well. U.S. Senators Brian Schatz and Sherrod Brown apparently sent letters to CEOs from Visa, MasterCard, and Stripe in an effort to get them to follow PayPal's lead.
Schatz and Brown say the impetus for their letters was concern that Facebook has done little to assuage concerns that Libra could eventually be used to fund terrorism and facilitate money-laundering. The senators are also afraid that the project could undermine national monetary policy and lead to economic destabilization.
One sentence in the letter is particularly interesting in that it questions the possibilities of combining encrypted messaging with a global payment system within the Facebook ecosystem. The sentence implies criminal activity. Are the senators' concerns valid? Perhaps. It is well-known that Facebook's messenger app has been exploited by criminals to facilitate conversations among themselves. It is not out of the question that combining the app with Libra could make things worse.
Specific fears aside, Schatz and Brown also stated in their letters that companies choosing to remain part of the Libra Association could face greater scrutiny from U.S. lawmakers. Such scrutiny would extend to "all payment activities" rather than just Facebook payments, according to the letter.
3. More lobbying on the way
With PayPal bailing, Visa and MasterCard considering following suit, and open threats by U.S. senators, it would seem that Libra is destined to fail before it ever gets off the ground. We may never know what the internal thinking is at Facebook, but we do know that those behind the Libra project are not going to go quietly.
According to CCN, leaked audio footage from a recent Facebook town hall shows just how unhappy founder and CEO Mark Zuckerberg is about recent hearings in Washington. Zuckerberg apparently made comments insinuating that Facebook would now follow a more personal approach of engaging lawmakers in one-on-one lobbying efforts.
Lobbying is nothing new in many parts of the world. The purpose behind it is to sway decision-makers to act in your favor without making a public spectacle of things. Call lobbying 'private negotiations' if you will. At any rate, Zuckerberg seems to favor quieter lobbying over public relations.
Zuckerberg's comments led to numerous questions. First, how much is Facebook willing to spend to lobby U.S. lawmakers? Second, do they have a long-range plan for European lawmakers? Even if lobbying efforts in the U.S. succeed in getting regulators off Facebook's back, similar success in Europe is not guaranteed. It would not make sense to try to launch Libra if Europe isn't on board.
4. Forking the Libra Project
The final news story deals with a new Libra fork known as OpenLibra. The OpenLibra project exists as a collaborative effort between some 30 blockchain companies and nonprofit entities. This consortium, if you will, plans to launch its own stablecoin built on Libra but with one big difference: it will be permissionless.
OpenLibra will ostensibly be a drop-in replacement for Libra itself. The organization behind it says that users will be able to move assets back and forth at will. They say OpenLibra's code will be almost identical to Libra's and will run on top of the Tendermint blockchain software. Tendermint is designed to function as a foundation for public blockchain projects.
Perhaps the most interesting aspect of OpenLibra is its funding. The project will not conduct a token sale. There is no equity behind it and no company has a controlling interest. Funding thus far has been received through grants and personal funds donated by interested parties. That is all well and good, but how will the project get new tokens into the hands of day-to-day users?
The project is still in its infancy right now. But developers have already published a permissionless version of Libra as a virtual machine. In essence, they have proven it can be done. Now they have to prove they can actually fund the project for years to come. Because if OpenLibra is going to succeed without a token sale or equity behind it, it's going to need a lot of money for a lot of years.
Incidentally, OpenLibra's token will be a stablecoin backed by Libra itself. If that sounds like an odd arrangement, it is. Libra will be backed by a basket of fiats and government securities when it finally does launch. OpenLibra will be backed by Libra. In a roundabout sort of way, that means the OpenLibra token will also be backed by the same basket of assets propping up Libra.
More news to come
News about Facebook's Libra continues to pour out in a never-ending stream. Who knew Facebook's grand financial services project would get so much attention in so little time? If this sort of thing gets your juices flowing, you are in for a great ride. There is little doubt that there is more news to come. Things are destined to get more exciting as we close the book on 2019 and start a new year, a year in which Facebook expects Libra to launch.
In the meantime, all of the attention being given to Libra means people are not paying as much attention to Bitcoin, Ethereum, Litecoin, and all the rest. But no worries. All of those other coins are still alive and well. People are buying and selling their cryptocurrencies without deference to what Facebook may or may not do. That's the way it should be. Facebook and its Libra project are by no means the be-all and end-all of cryptocurrency.