Haydn Franklin, Wednesday 8th January 2020, 2:21 PM CET
Libra 2020

Libra’s Failures in 2019 & Potential Success for 2020

One of the most significant subjects in the cryptocurrency industry in 2019 was Libra. This digital currency would maintain a banking system through various messaging applications, which would be operated by Facebook. It could’ve been potentially transformed the market, with aspirations of becoming the world’s first global currency mentioned. Unfortunately for Facebook, the Libra coin was destined for failure, similar to multiple other initial coin offerings.

The transformative power of technology has positively and negatively benefited the cryptocurrency market. The condition of Libra’s safety is continuously in question because of Facebook’s previous failures, which has negatively helped this ICO. The overcomplicated approach that is being managed makes the execution of this coin challenging. Facebook wants to manufacturer a global payment network, which could assist the billions of users that use Messenger and WhatsApp. The necessary infrastructure for this network is available, with the requirement for approval from various governing authorities awaiting. Facebook’s partners are also waiting for approval, which includes more than 200 members with the Libra Association.

The opportunity for Facebook to create an entirely new banking network is available because of the outdated nature of conventional systems. However, regulatory licenses are required for corporations to store and send money. The scrutiny involved with guarantying the operator’s safety and security is extensive, with efforts made to protect global citizens from money laundering and fraud. In the process of these regulations, new competitors are often beaten by former industry leaders. This has led to little improvement towards global banking systems.

Instances of an outdated market include banking corporations continuously being closed during the weekends. Consumers in rural countries can’t send global payments on the weekends. This is an issue that banking institutions have begun fixing, with real-time commercial payment services being enacted globally. These services are already available in nations like Canada and the United States. It should be noted that the Federal Reserve is creating their version of a real-time payment service. It’ll be called Fed Now and be available 24/7 all year long.

The Negatives

The Libra Token assists consumers with a payment system that’s combined with multiple assets. It prompts a more natural process when sending money digitally around the world. This would’ve been accomplished via Facebook Messenger, and WhatsApp, which combined has more than 2.5 billion users globally. It’s guaranteed that whenever the Libra Network is fully established, it won’t shut down under any conditions. This prompts significant concerns regarding the security of funds, primarily when Libra would act as a phantom network. Meaning phantom assets would be sent globally, with the genuine funds not being settled until hours or days later. The concern is that this action will prompt money laundering.

cryptocurrency basket, Libra Business Model, swiss finance authority

The basket of assets that Facebook has confirmed will be maintained with Libra, haven’t been detailed. It’s another reason why governing financial authorities are concerned, as without clarify over assets, regulation of a jurisdiction level would be impossible. Numerous regulators have prompted investigations into Facebook’s Libra coin, with the United States Senate questions multiple individuals connected to this digital currency. It included Mark Zuckerberg, who couldn’t honestly answer the questions. Since the US Senate looked over Libra, numerous other nations have, and bans have begun being dispersed. Libra cannot currently operate in the United States, India, China and multiple other countries. However, revamping the internal structure of Libra and reformatting its purpose could reverse these various bans. Ultimately, the Facebook corporation must create financial agreements with law-abiding governments to acquire regulatory approval and move forward.

What can happen?

This social media giant must adhere to the requirements of international regulations. Refusal to operate in this manner will make it impossible to run the Libra coin legally. Even if Facebook’s intentions are honest, to provide digital banking services for 1.8 billion that don’t have access to financial services. Subsequently, people living in volatile markets like Nigeria could maintain a stabilized asset. The cost to exchange money for these rural communities would be insignificant in comparison to Western Union.

The proposed banking network for the Libra Coin requires an exceptional level of due diligence, with Facebook needed to abide by the “Know Your Customer” legislation. However, the open-sourced design of Libra creates money laundering opportunities for billions worldwide. This goes directly against the KYC Regulations. Additionally, Facebook has sold the sensitive data of customers previously. Governing authorities have concerned that Facebook could sell banking data via the Libra platform.

The Libra coin cannot offer cash-advances or ATM Services until Facebook partners with pre-existing corporations. Legally, Facebook cannot provide personalized ATM services unless a banking license is maintained. Since the social media giant refuses to acquire this license, partnerships must be maintained going forward. It’s known that they’ve already partnered with M-PESA while having continuous talks with Western Union and various other ATM companies. Analysts have begun to notice that Facebook has reset their efforts towards rural nations, with a focus towards first-world countries dwindling quickly. This is because it’s challenging to compete against previous institutions across America, Canada and Europe. Subsequently, the costs for Facebook will be considerably lower in African and Middle Eastern countries. It should be noted that the Facebook Corporation plans to implement learning technologies with Libra, allowing them to sell spending habit statistics to corporations worldwide. This means an influx of Spam Callers and Emails.

One of the ways that governing authorities could stop money laundering with Libra is by implementing a threshold policy. This means anybody wanting to engage this digital currency would have limitations on how much could be purchased, held and traded. The government-mandated authority would be required for this policy. However, it would stop individuals from not maintaining more than $50,000.00 of Libra yearly. Policy enforcers have stolen this legislation from the Chinese Nationals, who implemented this law across all cryptocurrencies. It lowered money laundering schemed by 72% in the Democratic Republic of China.

Facebook Libra Coin, growth for bitcoin

They’re still a small percentage that Facebook can rework the Libra coin and accomplish their stated goals. Unfortunately, actions of fraud by illegal entities worldwide will stop that legalization immediately. Facebook refuses to provide details or insight into what security programs will be maintained to prevent fraud. Analysts and legislators have taken this as there isn’t any plan to implement these programs. It would create a wild west for financial criminals. Considering that disputes that Facebook has had legally with Libra and their refusal to provide internal knowledge, analysts have begun to question if a money laundering-assisted network is what Facebook secretly wants. By destroying financial markets worldwide, Libra could revamp its security methods and become a globally recognized currency. This unconfirmed plan would cripple the global economy for the benefit of Mark Zuckerberg’s glory. It should be noted that there has already been Libra Scams in nations like Kenya and Nigeria.

The Solution

The Libra Association has numerous problems to overcome if they are to maintain a payment network. Considering that Facebook with working with Visa, they should inquire about their assistance. This could benefit the association, allow them to become a publicly-traded company and receive the trust of global entities. However, Mark Zuckerberg has always maintained resistance towards governments. This leads many to believe that he won’t consider any alterations in Libra’s strategy.

The primary goal for the Libra Association should be to receive United States approval. Per the Federal Reserves approval, with the Security and Exchange Commission, Facebook would be operating in the regulatory framework of American. The Libra coin would become internationally accepted in out democratic nations, with communist regimes like Russia and China still banning the currency. This requires Facebook to provide over the intimate details of Libra’s development cycle, security programs and banking connections. It would also require them reworking the structure of the Libra coin. The third and final requirement Libra must adhere for national regulatory approval is to create a centralized administration. This administration could govern the anti-fraud systems and assist consumers with any potential issues.

Another element that will benefit Facebook’s trust with governing authorities is by offering lower fees with sent payments. Most banking institutions require less than $1.00 to $0.50 for a global transfer. Extending their potential trust amongst worldwide governments, Facebook could provide developers with the capability to build applications on top of the Libra payment platform. Following these various steps will allow Facebook to avoid the termination of Libra on a worldwide level. Without Libra becoming centralized and reworking the platform, the goal to maintain a global currency will be impossible for Facebook.

Author: Haydn Franklin

Hayden joined whichbroker.com in March 2019. He previously held positions at leading US facing financial news outlets. Hayden's focus is primarily Crypto and Forex news at whichbroker.com, however he is also whicbrokers long form content specialist leading him to write longer posts with an investigative angle. Hayden gradutated from the University of Chicago. Haydn Franklin can be contacted at [email protected], View all posts by Haydn Franklin

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