Guess who's back. A flurry of new developments during the past week related to Libra, Facebook's proposed digital currency, has set the stage for the next round of political fighting over the project's future. Just a few weeks after the company admitted to investors that increasing regulatory scrutiny could mean that Libra may never launch, the company now seems as determined as ever to get it off the ground—however long that takes.
Perhaps most importantly, Facebook has hired a lobbying firm to focus on "issues related to blockchain policy." The social network has spent $7.5 million on lobbying so far in 2019, after spending nearly $13 million last year. Now it has added Washington, DC-based FS Vector, a firm that focuses on regulatory compliance and business strategy. One of its partners, John Collins, was formerly the head of policy at Coinbase, the popular US exchange.
Facebook's announcement two months ago that it planned to launch Libra was immediately met with skepticism from policymakers and central bankers around the world. They raised concerns about security, privacy, and the potential risk to financial stability. Critics have also lamented the lack of details regarding how the currency will be managed, sending Facebook back to the drawing board. Now the discussion seems ready for its next phase.
Libra has taken fire from both sides of the aisle in DC, but one particularly vocal critic has been Maxine Waters, chair of the House Financial Services Committee. Late last week she met with Swiss government officials to discuss Libra, which Facebook has said will be managed by a Switzerland-based nonprofit called the Libra Association. After the sit-down, Waters said she still has concerns about "allowing a large tech company to create a privately controlled, alternative global currency."
According to a report this week from the Financial Times, the increasing regulatory scrutiny has led some members of the Libra Association to grow wary as well. Three unnamed members have even been "privately discussing how to distance themselves from the venture" as pressure builds.
Facebook has said that the back-and-forth with policymakers, regulators, and experts was what it was aiming for when it revealed its plans early. In that vein, today it also launched a bug bounty program that will pay security researchers up to $10,000 if they find critical bugs. "We know it will take a global community to launch a global cryptocurrency," the Libra Association's Michael Engle said in a blog post describing the program. "We are committed to taking the time to get this right."
Move over, Libra. The "Gram" is apparently coming soon. Long before Facebook revealed its vision for a global digital currency, there was the "Gram." The currency, which is being developed by Telegram, the popular messaging service, is apparently on track to launch before the end of October.
Three unnamed investors who have recently spoken with Telegram told the New York Times that the company plans to send out "the first batches" of Gram coins sometime within the next two months. According to the report, the company agreed in legal documents to deliver Grams to investors by October 31, or else return the money. The investors also told the Times that Telegram will make digital software wallets available to the 200 to 300 million people globally who use its messaging application.
Around the time of its $1.7 billion ICO in early 2018, the company made big claims about the so-called Telegram Open Network (TON), the blockchain system that would run the currency. It suggested that TON's developers would be able to overcome some of the biggest technical roadblocks facing other blockchain networks that aim to serve hundreds of millions or billions of people.
Since then, the development of TON has mostly proceeded behind closed doors. That's in contrast to the approach taken by Facebook, which preemptively revealed its plans to regulators and has promised not to launch without their approval. And whereas Facebook envisions a private, regulatory-compliant blockchain network, Telegram is apparently aiming for a more decentralized network that will help users get around those regulations.
The international monetary order may need a digital revamp. That's according to Bank of England governor, Mark Carney. In a speech last Friday at an annual gathering of central bankers in Jackson Hole, Wyoming, Carney argued that the US dollar's domination of the global financial system has become problematic, since "developments in the US economy … can have large spillover effects to the rest of the world via asset markets."
The solution, Carney said, may be something like Libra, the digital currency Facebook has proposed.
The dollar is the world's dominant reserve currency, meaning that governments stockpile it for use in global trade and finance. Though China's currency, the renminbi, is becoming more commonly used in international finance, Carney said it "has a long way to go" before it can be a true reserve currency. In the meantime, he said, perhaps what's needed is a new digital currency (he called it a "synthetic hegemonic currency") controlled by central banks.
Carney pointed out that more and more retail transactions are going digital, and that new technologies are lowering the cost of cross-border transactions. Then he called out Facebook's digital currency project by name. "There are a host of fundamental issues that Libra must address," he said, including those related to privacy, money-laundering, and security and reliability. Beyond that, he said, depending on its design, Libra "could have substantial implications for both monetary and financial stability."
It's worth considering whether such a new currency would be best be managed by the public sector rather than technology companies, Carney argued. "Even if the initial variants prove wanting, the concept is intriguing."
In just three weeks...
You could be shoulder to shoulder with the most brilliant minds in emerging technology. Reserve your seat at EmTech MIT before it's too late.
Loose Change
Fill your pockets with these newsy tidbits.
- The Royal Canadian Mounted Police, the FBI, an Australian investigative agency, and a fourth undisclosed agency are all apparently investigating QuadrigaCX, the defunct Canadian cryptocurrency exchange that collapsed earlier this year after the mysterious death of its founder. (CoinDesk)
- ICYMI: Some crypto-criminals think jumping across blockchains covers their tracks. Big mistake. (TR)
