Reasons Why US Government Won't Ban Libra Cryptocurrency

Things are heating up for Libra: This week's United States congressional hearings showed that many politicians are not convinced by the safety aspects of Facebook's cryptocurrency project, as they grilled the social media giant on privacy- and trust-related issues.

The Banking Committee hearing, which took place in Congress on July 16, showed that it will be difficult for Facebook to change regulators' opinion toward Libra.

Brown subsequently referred to Libra as a "Recipe for more corporate power over markets and over consumers." That, combined with remarks from other politicians, such as Rep. Waters, who have asked Facebook to halt the development of Libra "Given the company's troubled past," seems to coincide with the arrival of a drafted bill titled "Keep Big Tech out of Finance," allegedly deriving from within the U.S. House of Representatives Financial Services Committee.

"The bill, in its current form, can be nothing more than a stunt move. There is no widespread political support behind it and it seems to be primarily motivated by the general disenchantment with Facebook and the big tech. There is no demonstrated risk for the bill to tackle, and the US in particular is very careful not to regulate unless there is substantial evidence of harm."

"A complete ban like the one proposed by the bill is an extreme and untimely measure. It is true that there other laws place structural separation between banking and non-banking activities, but this is not at all similar to FB's situation. For one thing, we don't even know what kind of financial instrument Libra will be considered to be. There are several milder ways to police Libra depending on what the law wants to achieve. If it is financial stability, the law can institute oversight mechanisms; if it is privacy, they can regulate data collection, use and sharing; if it is that FB is becoming too powerful, they have antitrust. A complete ban is misplaced at this point in time."

"Indeed the Senate hearing today highlighted that Facebook has a lot of work to do with regards AML and compliance before convincing US regulators that they have a role to play in issuing cryptocurrencies. Successful crypto companies are taking a long term view with regards to focusing on compliance first. The last couple of years of cryptocurrency development has provided a blueprint for Facebook to follow and it is up to them if they take it on board."

"Facebook is still heavily subject to government laws and regulations around data collection, privacy, and taxation. Openly flouting government requests to halt Libra until further notice, would likely bring Facebook more in the cross-hairs of regulators."

U.S. House Minority Leader Kevin McCarthy has recently praised Bitcoin while criticizing Facebook's Libra stablecoin during an interview with CNBC. Similarly, former Republican congressman and presidential candidate Ron Paul said he is in favor of cryptocurrencies and blockchain technology because he likes competing currencies.

"It seems there is only one thing the US Gov and Facebook agree on: cryptocurrency is the future," Kris Marszalek, CEO at Crypto.com, told Cointelegraph.

The second day of hearings is well on the way, and it kicked off with a bang: Rep. Waters started her speech with claims that Facebook has shown a "Demonstrated pattern of failing to keep consumer data private on a scale similar to Equifax" and "Allowed malicious Russian state actors to purchase and target ads." Time will show if Facebook manages to convince the legislators, but it seems that there are not a lot of tools at the disposal of U.S. regulators that could stop Libra from taking shape.