It is no secret that Facebook’s Libra cryptocurrency has raised multiple eyebrows across the world, especially for politicians and people employed in the financial sector.

For nearly a month we’ve been hearing about countries threatening to ban, regulate or simply ignore Facebook’s Libra project, saying that it lacks regulatory clarity and that the business model is not sufficient.

Well, these vague reasons have become more than enough for the large majority of crypto enthusiasts as well as market outsiders and clear and well-structured arguments are now in demand.

What Really Has People Spooked About Libra?

All it takes to find out the truth is to look at the influence that Facebook has garnered over the years across the world. It currently has more than 2.5 billion users globally, and the amount of information it has stored about them is sometimes scary.

No Faith in Facebook

We all know how Facebook has always been in controversies regarding user data selling and etc, for which they’ve been in a senate hearing and recently scored themselves the largest fine in the history of mankind. Not the US, not North America, the world, $5 billion will have to be paid.

One reason is that banks and governments don’t trust Facebook enough to manage all of the user funds it will accumulate on the platform, therefore the need for regulation and local compliance.

Loss of Control

Another reason is that central banks and the government don’t want to lose their monopoly on printing money. Having Facebook take control of almost a third of the world’s population in terms of monetary policy and whatnot creates a bottleneck and a conflict of interest.

Furthermore, judging by the fact that Facebook will introduce a unilateral financial platform for people of different nationalities and compliance of different jurisdictions there is also a fear of opening up specific markets to populations who have it barred from the local government.

Imagine a middle eastern country which has a complete ban on financial trading or online gaming. Facebook’s Libra will give the population the ability to access these markets despite local laws.

Fiscal and Monetary Policies

Whenever a government wants to make significant changes in its fiscal or monetary policies, they need to have at least some kind of guarantee that it will actually work, right?

There may be several countries that rely mostly on foreign affairs or a single local industry for their exchange rate, but most have diversified factors that influence their currency exchange rate.

Having Facebook’s Libra, which is pretty much the upcoming largest bank in the world, puts a big stop sign on any and all monetary and fiscal policy changes from the governments, effectively rendering them useless.

And this is because of very small detail, alternatives. Libra could potentially become an alternative repository space for citizens’ funds if interest rates are cut way too deep or if inflation rates start going through the roof.

Losing control of people’s behavior in regard to their financial situation during recessions is what could potentially render the government useless in regards to maintaining the local economy, especially smaller countries.

Losing Industries

Governments are not the only entities that are not too happy about Libra as well. Although currencies are mostly the central bank’s concerns there is also one financial industry that is directly correlated with it, and that’s Forex.

Having Forex brokers lose quite a large chunk of their trading volume and especially their trader benefit advantages over Libra’s intervention in the international market could also translate into a small recession for countries with slightly larger industries.

The reason why trader benefits are so important in this argument is that if brokers can’t acquire new customers using them, then it paints the worst image possible for them.

For example, in Europe, Forex brokers in the UK and Cyprus are a large supplier of tax payments to the government and sort of act as one of the most important companies in the region, ultimately turning into “game-changers” and they rely on getting new traders every day as customer retention is quite low in the industry.

Having these companies lose their footing in the wake of Libra’s currency dominance in the world, would add up to the fiscal and monetary policy issues.

Financial Risk for Users

Another concern from the government is the financial risk for the users themselves as cryptocurrencies are usually the victims of hackers.

Although many would argue that Facebook has one of the best security measures in the world, there’s still risk associated with it.

Having such a large chunk of the world’s finances combined on a single platform introduces much more danger should even one hacker manage to break in the system.

Up until now, cryptocurrencies were always targeted on different crypto exchanges, which gave some kind of safety than if they were stolen, then they would be only a very small part of the overall market cap.

Should Facebook’s database be hacked into, even a one percent loss could mean billions of dollars lost for the users.

A new monopoly?

There’s a new video game coming out very soon, called Cyberpunk 2077 which is about a fictional world overtaken by greedy corporations.

That fictional world is actually what many experts are comparing Facebook to because there is actually some risk that the company can have a monopoly over the financial sector of multiple developing countries.

Developed countries like USA, Japan, and China have the ability to combat Facebook’s influence, but smaller ones in the ASEAN region or in Africa stand no chance at all.

Most of the angst against Facebook’s Libra come from political concerns rather than economic, and it’s no secret that every country fears the loss of political power in their very own country.

Will Libra launch?

India has already expressed readiness to ban Libra completely should it not comply with the local regulations, and other countries are sure to follow if the concerns continue.

Players of the Libra Association have also commented that their involvement in the project is not final, putting the whole “no 1 company is in charge of Libra” under a serious question mark.

Visa’s CEO and board chairman, Alfred F. Kelly, Jr., remarked in a Q3 2019 earnings call on Tuesday:

So we have signed a nonbinding letter of intent to join Libra. We’re one of – I think it’s 27 companies that have expressed that interest. So, no one has yet officially joined.

The rest are just privacy issues voiced by potential users that social and financial accounts will be interwoven because of Libra, which the company is trying to deny as much as possible.

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