According to the Wall Street Journal, Visa and MasterCard are getting cold feet about helping build payment infrastructure for Facebook’s Libra project.
The Wall Street Journal said that a number of financial partners were starting to back away from Libra because of regulatory concerns.
This comes on the heels of a September 9 meeting in Switzerland in which financial regulators from across the globe questioned members of Libra. It also follows the skepticism expressed by Congress in July, during hearings with Facebook, in which the government expressed numerous reservations regarding regulation.
There’s a lot going on that is left unsaid in the media about Libra, and one has to read between the lines and said what is really going on.
This all has to do with maintaining the stability of global currencies, not the least of which is the U.S. dollar.
Despite the hysteria of cryptocurrency enthusiasts, fiat currency is not going anywhere. Outside of dictatorial regimes like Venezuela and North Korea, and the rare insolvency of countries like Cyprus, the world’s bankers have a vested interest in maintaining fiat currency.
There is certainly cause for concern in some of the weaker economies, and for countries that have enormous levels of debt. In the current monetary system, the prospect of anything undermining fiat currency has to be taken seriously.
This is exactly the reason why regulators chirp up from time to time, talking about taking precautions and making certain that cryptocurrencies like Libra are regulated properly.
Treasury Secretary Steve Mnuchin’s press conference earlier in the summer is exactly one such example.
Any cryptocurrency like Libra that gets too big for its britches is going to be slapped back by regulators and governments. The last thing any world government wants to see is some alternative payment system launched by a private company.
That’s actually an even bigger threat than sovereign cryptocurrencies.
Facebook is already a very powerful entity. Global bankers do not need that entity creating its own currency that attracts a significant number of users.
While the exact number of Facebook users is always up for debate, the user base likely exceeds several hundred million people at this point, and probably over a billion people.
Ask yourself: If you’re a banker, do you want to see Facebook creating and nurturing its own currency? Of course not.
The reason why Visa and MasterCard and other financial entities are starting to get cold feet is because the last thing they need is additional regulatory scrutiny.
These companies already spend enormous amounts of money on compliance with both domestic and international regulations. Compliance is extraordinarily complex, particular when one starts dealing in international markets.
Visa and MasterCard do not need or want even more regulatory scrutiny in trying to facilitate Libra transactions. That’s why the occasional saber-rattling of global regulators exists, namely, to have a chilling effect on those same financial partners.
The regulators, whether from the United States or elsewhere, aren’t stupid. The whole notion of regulating a cryptocurrency undermines the very concept of cryptocurrency in the first place. The crux behind most cryptocurrencies is to be completely sovereign from control of any government.
Yet what bitcoin and other cryptocurrency enthusiasts refuse to accept is that the United States government is already strictly regulating them.
How many initial coin offerings, and other non-registered bitcoin transaction services have come under assault by the Securities and Exchange Commission (SEC)?
Ed Butowsky, managing partner of Chapwood Capital Investment Management, tells CCN:
“The United States dollar is the strongest currency in the world. Regardless of which party is in charge, our government will not let anything threaten the dominance of our currency. It is the central linchpin to the entire global economy. That’s why Libra is unlikely to ever get off the ground, world will be prohibitively regulated if it does”.
Last modified (UTC): October 3, 2019 14:43