Will Libra be a rainbow bubble?
Facebook’s digital currency, Libra, is still in its infancy, and its roots have begun to waver.
The biggest blow to Libra currently comes from Paypal. The payment company announced a few days ago to withdraw from the Libra Association of 28 financial, e-commerce, digital currency and Internet companies.
Then, according to the Wall Street Journal, two financial institutions, Visa and Master, are considering withdrawing from the Libra Association. The digital payment agency Stripe is also considering exiting. Whether Paypal’s parent company, eBay, will withdraw from the alliance is currently unclear.
28 founding members of the Libra Association, image source: libra.org
Paypal did not explain why you quit. However, it said that it will still maintain a partnership with Facebook after “abandoning further participation in the Libra Association”. However, the Financial Times believes that it may be worried about Libra’s opposition, and that Libra’s digital currency will encounter illegal problems such as money laundering.
If the Paypal family quits, the relationship is not great for Libra. However, if Visa, MasterCard and Stripe leave the Libra Association together, it will lead to the lack of sufficient weight of traditional banking and non-bank payment and clearing institutions in the Libra Alliance, and its trading base will be shaken, resulting in insufficient Libra’s circulation trading infrastructure.
In addition, the increasingly stringent regulatory attitudes of national regulators have also led to the disruption of Libra’s issuance. National legal currency issuance must be carried out by the central bank and endorsed by national credit. Libra’s issuance is priced through a “basket of currencies” (ie, major currencies such as the US dollar and the euro), which is determined by the business practices of 28 Libra members, avoiding regulatory mechanisms such as the central bank. This makes central banks very wary of Libra. The main EU member states, Germany and France, have publicly stated that Libra is not allowed to enter the country. Countries such as the United States, Canada and Australia are also investigating Libra.
Because of the previous rumor that the Indian government may ban the use of digital currency in its own country, Libra’s circulation in the world’s major populous countries and developed economies has become a reality.
This forced the Libra Association executives to announce at the end of September that the cryptocurrency may have been postponed due to regulatory concerns around the world. Since Libra is an important strategic transformation measure of Facebook, it will not easily give up its efforts in this field. It will intensify lobbying for governments to accept Libra, build an effective regulatory mechanism, and will continue in the future. Strive to maintain the Libra Association.
Corresponding to Libra’s supervision and investigation, central banks, including China’s central bank, are considering issuing legal digital currencies. Even if Libra is able to gain support from some countries, such as Singapore, which is discussing with Facebook, how it will play a global game with the official legal digital currency will be a new issue.