Regulators and Partners Doubt Facebook’s Cryptocurrency Plans

Social media giant Facebook’s announced its plans to launch a stablecoin last week, but the company’s partners and regulators are still unsure about the coin. The caution amongst partners can be seen in their nonbinding agreements with the company.

Why are partners still wary of Libra?

Facebook’s Libra cryptocurrency project has 27 partners, which include some of the biggest payments firms in the world- MasterCard and Visa. As per the New York Times, executives from seven of these partner companies spoke about their concerns to journalists.

These executives, on the condition of anonymity, said that their companies signed nonbinding agreements to join the Libra project. The agreements suggest that the partners were not obliged to promote or use the digital token and will be allowed to easily back out if they didn’t like where the project was going.

Companies are still hesitant in associating themselves with Libra, even if they have partnered with Facebook for the project. The companies are worried about Facebook’s problems with global regulators and its unreliable record on user privacy. Additionally, cryptocurrencies are still operating in a grey area of law and finance, which makes partner firms uncomfortable.

Regulatory burdens increase on Facebook

Facebook’s privacy scandals have already grabbed the attention of the regulators. The recent announcement stirred the lawmakers once again. House Financial Services Committee Chairwoman Maxine Waters has now scheduled a hearing for Facebook on July 17. The Senate is also expected to hold a hearing for the company before that. The lawmakers have asked Facebook to stop the coin’s development until some “big questions” are answered.

The US Federal Reserve is also concerned about Libra. On Tuesday, Fed chairman Jerome Powell said that the central bank would be looking at the coin “very carefully.” He noted that the Feds’ expectations would be very high in terms of regulation and consumer protection. In Europe, politicians have started opposing the idea of a Facebook-backed digital currency. They talked about the coins potential for money laundering and privacy concerns. European regulators, meanwhile, has asked for detailed information on the project.

Interestingly, Facebook partners haven’t pooled in the resources that the company needs. While Facebook suggests that 27 partners have committed $10 million to the project, no real exchange has happened so far. Facebook plans to make its partners a part of Libra’s governing association, but numerous firms are still undecided about joining the association. According to the unnamed executives, these firms will make payments and join the governing association only when there is further clarity about Libra’s working.