Countries aren't impressed with Facebook's Libra plans

I closed yesterday's newsletter with skepticism that we'd see any attention from regulators in the near term, after Facebook debuted Libra. Well, I was wrong, because yesterday was an eventful day after I sent out the newsletter.

Just a few hours after the wraps came off, French and German officials were already calling for scrutiny over the plans

French Finance Minister Bruno Le Maire said Facebook’s cryptocurrency, called Libra, must not “become a sovereign currency. It can’t and it must not happen,” he told Europe 1 radio. Le Maire reportedly called for G7 banking officials to issue a report on Facebook’s plan next month.

But, more surprising, was what happened back home in the U.S., where senators suddenly started demanding that Facebook halt development of the currency, and be dragged in front of Congress:

"Regulators should see this as a wake-up call to get serious about the privacy and national security concerns, cybersecurity risks, and trading risks that are posed by cryptocurrencies," she said in a statement. "Given the company's troubled past, I am requesting that Facebook agree to a moratorium on any movement forward on developing a cryptocurrency until Congress and regulators have the opportunity to examine these issues and take action."

That hasn't happened yet, but the idea appears to be gathering support—regulators tend to be slow to respond on things like privacy, which vexed governments around the world. But, the stability of their currencies is another matter altogether. Facebook hasn't responded to any lawmaker yet, seemingly caught off-guard.

We also learned a little bit more about Facebook's grander ambitions for the technology. I was already questioning Facebook's claims that it wouldn't use Libra to collect data, but an interview with the Australian Financial Review revealed one goal is a push into lending:

David Marcus, the former president of PayPal whom Facebook appointed to lead its blockchain project, told The Australian Financial Review it wanted to use the data generated by Calibra to move into lending. Taking on major banks' profit pools won't be a strategy that endears it to incumbents.

One story I noted, which helped me better understand why vendors were getting involved, talks about why Spotify is onboard—better payment systems for underserved markets, which would expand their addressable market:

“One challenge for Spotify and its users around the world has been the lack of easily accessible payment systems – especially for those in financially underserved markets. This creates an enormous barrier to the bonds we work to foster between creators and their fans. In joining the Libra Association, there is an opportunity to better reach Spotify’s total addressable market, eliminate friction and enable payments in mass scale.”

These claims are central to Facebook's plans for launching Libra, which it says is intended to help the "unbanked" but The Financial Times has a detailed argument about why that's hogwash:

Facebook seems to think that the unbanked face a systems challenge, to be fixed with private investment and remote engineers. But the people who actually study the problem of the unbanked, and who actually do something about it, treat it completely differently: as a sociological challenge, to address with education and local institutions.

This story is going to be a long-winded one, but it's been interesting to see how rapidly it's evolving despite only being in a concept stage. Still, many of these links shed light on Facebook's plans, and how governments are responding on day one—stay tuned for more in the coming days.

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