American regulators pushed back against Facebook’s cryptocurrency initiative out of fears relating to stability in the financial sector and data protection.
Politicians thought that Libra threatened to develop an uncontrolled cryptocurrency ecosystem that would ultimately be shut down.
The failure of Libra revealed increasing regulatory concerns for the blockchain technological field.
As stated earlier, in June 2019, the Facebook founder Mark Zuckerberg declared the creation of the Libra blockchain intending to redefine the international payment system. However, the effort that commenced as a decisive measure towards the introduction of a new currency in the digital world was fully countered by the American authorities. The sharp resistance that was displayed from different politicians contributed to the future way how the regulation concerning the blockchain technologies will look like.
U.S. Regulators Express Concerns
From the very beginning when Libra was announced there were a lot of discussions on how it may affect stability of the financial system and authorities regulation. The loudest among the critics was the Democratic Senator Sherrod Brown of Ohio who described the idea of relying on Facebook as a sheer delusion. It gave voice to similar doubts about the social media giant’s record of protecting personal information and ability to oversee a world currency.
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Dem Rep Joyce Beatty was especially harsh during a Senate Banking Committee hearing, and she attacked both Facebook and more general concerns of corporate governance. She underscored the risks of investing your money in a company, which was accused severally of being incompetent in protecting the user’s data.
Financial Policy and Shadow Banking
Democratic Party representative Ayanna Pressley expressed opposition to Libra's potential to create a shadow financial system, despite other critics' concerns. Her worries were that Libra could go round other tested regulatory measures, and end up crafting a new system in which the interest of the company comes before that of the consumers.
A fellow Democratic senator from California Dianne Feinstein shared the same sentiments on how a utility-controlled digital currency will affect the country’s currency system. Her questions were related to what appear to be broader worries about these kinds of corporations, such as Facebook, and how they might influence the world’s financial systems, specifically through Libra. As the pressure from U.S. regulators and lawmakers intensified, Facebook was eventually forced to abandon the Libra project.
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