Facebook’s Libra Cryptocurrency: Failure to Launch?

Facebook’s Libra plan is a massive digital cryptocurrency for peer-to-peer payments. It has the appearance as a way to reinvent itself with a new digital disruptive service. This creative destruction financial concept could go in the Silicon Valley record book to break up global banking models. Yet, the Libra plan has three key major challenges that could lead it to implode and fail. Facebook seems to follow its mantra to “go fast, release it, break things, clean up, and worry about regulators later”.

If Libra cryptocurrency is successful for peer-to-peer payments, then it’s a new global currency. This proposed Libra coin could have a major impact and influence on international and US federal monetary policy. It would include financial stability, monetary deposits and exchange networks and systems. Does Facebook have the right leadership team with financial experience to be successful?

Fed’s Jerome Powell Has ‘Serious Concerns’ With Facebook Libra Proposal – Bloomberg Reporting on 7/10/19

Facebook still struggles with key data privacy challenges. They range from many software services for “Fake News” to altered videos for political misuse. Facebook’s latest user data leak on Amazon’s Cloud had user passwords in plain text. Its newest service offerings for private communities are adding new challenges. Some new private community groups appear with hatred and misinformation. This is a huge problem for Facebook. Its size is over 2.7 billion active users with Messenger and WhatsApp. Now Facebook’s new Libra cryptocurrency wants to manage your global peer-to-peer payments!

Here are three key challenges that could cause Facebook’s Libra to fail.

Will Facebook pass International and US fiscal policies and regulations scrutiny?

Facebook’s Libra plan appears to be in trouble with the US and other countries regulators. Facebook’s key challenge is who will govern and set cryptocurrency standards. US and international fiscal entities lack defined policies and regulations for cryptocurrency operators. Without an oversight organization, it allows every country financial oversight authority for approval.

Facebook presented a 12-page Libra white paper to key US agencies. It briefed executives at the Treasury, Federal Reserve and Security and Exchange Commission (SEC). Other fiscal oversight agencies with unknown risk exposures” needs clarification. Facebook lacked readiness for this oversight meeting. Agency questions hit hard on consumer protections, interoperability, and data portability for competition. Past cryptocurrency operator, such as Bitcoin, drove money laundering and terrorist payment controls.

Can Facebook move pass US Congressional oversight committee hearings?

First, two Congressional Committees held hearings on antitrust and Libra. They scrutinized tech giants Amazon, Facebook, and Google for the potential to monopolize their marketplace. Facebook did the worst with the committee member questions. In the second hearing, it scrutinized the Libra plan. The committee members appeared to have the worst view of Facebook’s inadequate track record. The key issue was the lack of privacy and security. The committee discussions hit hard on past consumer’s data breaches and misuse.

Facebook’s leadership and its past failures paint an ugly reputation and trust position with its failed Federal Trade Commission (FTC) settlement agreement.

“Facebook has burnt down the house over and over and called every arson a learning experience” – Senator Sherrod Brown of Ohio

US Congressional hearings, held over two days, scrutinized big tech antitrust and Libra cryptocurrency concerns. The key issue was Facebook’s powerful platform size and past privacy problems. Libra’s testimony from Facebook’s cryptocurrency chief, David Marcus, did not go favorable or end well. Most of Marcus’ responses were very general and vague.

Many international government leaders have opposite Facebook Libra coin currency too. Most government-backed currency standards such as the US Dollar, EU Euro, or Yen need governance and liquidity controls. This fear is still real to avoid another worldwide financial collapse like 2008. The Libra Association does not have any proven large international banks onboard. Without global financial regulatory experience, it looks too risky for approval.

Can Facebook solve key Libra and Calibra technical challenges?

Facebook has been building the Libra cryptocurrency effort in secret for almost two years. It drove this development effort with Calibra cryptocurrency coin and Calibra digital wallet. Its goal applies an open blockchain app.

It’s not clear how Facebook would overcome known blockchain technical challenges. Take a deeper look at the open blockchain app. This new open blockchain-based with portable digital identity app is still a work-in-progress. This includes development, test plans, and market-ready use for global acceptance. Blockchain adoptions are hard and not easy for users adoption and use too. Common problems arise with a private key. Usually it’s missing or destroyed. This effort is complex and is an expensive effort to reset it; this according to Mike Orcutt /MIT. Facebook’s data privacy past misuse and now blockchain privacy would be another challenge for it to safeguard users with little to no trust. In the Libra plan, it is vague how user identity management will work with their platform, Calibra wallet app and support role in the start-up years. It looks more of a centralized identity management system. It states to be a decentralized management system with the Libra Association of 28 associates now and up to 100 in the future. “That’s not decentralized”—it’s just a standard for 100, per Wayne Vaughan/Decentralized Identity Foundation.

“I don’t see how Facebook can do it” – Christopher Allen, credentials community group; World Wide Web Consortium

The technology of decentralized identity points to a few useful pilots. It’s “not anywhere near ready” for adoption by billions of people around the world, according to Vaughan. Facebook doesn’t look ready to be successful now or the near future. Think five-plus years out to launch Libra cryptocurrency. Key global regulations with decentralized digital identity schema challenges are solvable.

Bottom line:

Facebook faces huge regulatory hurdles. New regulations are a very slow process with approvals. International and US regulatory challenges should stop the Libra launch.

Facebook’s credibility and reputation on open-source blockchain app is questionable for the plan. Facebook is unclear on interoperability for other developer cyber wallets. It needs data portability built-in and it seems unlikely to be ready before 2024.

Facebook and its Libra Association are many years away for adoption. It requires more complex development and testing. The plans miss a useable open “decentralized” identity-based blockchain app.

Copyright @ 2019 HAWALD ADVISORY, LLC. DISCLAIMER: This article is my opinions without financial payments. I do not hold any stocks or affiliations with any of the mentioned organizations above. Image is by pixabay.com.



The views and opinions in this analysis are my own and do not represent positions or opinions of The Analyst Syndicate. Read more on the Disclosure Policy.


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