Libra was first announced approximately eight months ago in June of 2019, and for the most part, the reception has been mixed.
Why Is Libra Losing So Much Support?
Many banks, regulators and members of the public have scoffed at the idea that Facebook – the parent company behind Libra – would seek to enter the financial fray. With so much scandal under its belt in the past two years alone, one wonders how such a venture could even exist, and that a company like Facebook would even dare to request access to one’s financial data.
At the same time, the project has garnered enough support over the past eight-month period to build up its newfound Libra Association. These members will govern the new cryptocurrency payment system once it fully becomes operational, which the company says is still the goal for 2020. They will decide how Libra can be used, and what it’s properties will be in the future.
At the same time, this support has been lying across a few creaky boards, with many companies that once pledged allegiance to Libra – i.e. PayPal, Visa, Mastercard, etc. – now getting out before things get too hairy. What’s the issue they’re facing? What are they so scared of?
The biggest problem appears to be lagging regulatory clarity. Many companies have expressed concern that Libra cannot be regulated in the same way as other financial entities. This, they say, is likely to cause a firestorm in the coming months, and lead to an extremely tight and wound up environment that’s going to be extremely difficult to operate in.
Mastercard CEO Ajay Banga explains in a new interview why he felt his company was better off without any ties to the Facebook crypto project. Aside from regulatory concerns, he states that very few of the project’s executives were willing to put anything in writing, a red flag for any business manager. He also states that the company was not very explanatory on how it would make money, which meant that a partnership wasn’t likely to amount to much.
How Are You Going to Make Money?
When you don’t understand how money gets made, it gets made in ways you don’t like… I’m like, ‘This doesn’t sound right’ […] For financial inclusion, the government has got to pay you in this [currency], you’ve got to receive it as an instrument you can understand, and you have to be able to use it to buy rice and cycles. If you get paid in Libra which go into Calibras, which go back into pounds to buy rice, I don’t really understand how that works.
He says that if Libra has stayed a simple cryptocurrency that would allow users to gain access to financial tools that they otherwise couldn’t attain instead of turning into a whole wallet system, the project probably wouldn’t have raised so many questions.