Facebook’s (FB) cryptocurrency executive David Marcus was grilled by members of the Senate Banking Committee Tuesday on Libra, the company’s planned cryptocurrency. But some of the project’s biggest skeptics are in the crypto community.
Cryptocurrency investors, engineers, and entrepreneurs have expressed a host of concerns over Libra — from Libra’s lack of clear plans around know-your-customer/anti-money laundering protections, to the risk of regulatory scrutiny spreading to large-cap cryptocurrencies like bitcoin (BTC-USD), to Facebook’s potential to tax the global electric grid.
Some say Libra isn’t really a “cryptocurrency” at all.
Is Libra a cryptocurrency?
Meltem Demirors, chief strategy officer at digital asset manager CoinShares, said the primary problem is Facebook’s representation of Libra as a cryptocurrency.
“My issue is, Facebook has chosen to style this as a ‘cryptocurrency,’” Demirors told Yahoo Finance’s On the Move. Facebook’s framing of Libra, Demirors said, has led media and lawmakers to say “what they’re doing is just like bitcoin and should be treated similarly, and it’s fundamentally not.”
“They’re using cryptocurrency for marketing,” she added.
Demirors — who is due to testify about Libra before the House Financial Services Committee on Wednesday — wants regulators to understand the differences between “open, public, permission-less digital currency networks,” like bitcoin, and Libra, “an entity that benefits Facebook and a small group of participants in this Libra association.”
Meanwhile, one blockchain engineer thinks the Libra concept is unusually half-baked for a giant like Facebook.
“‘Make it up as we go along’ is reasonable for a seed-stage startup, but not something one would expect from a half-trillion-dollar tech company — especially not one that’s collecting $10 million checks from prospective members,” wrote Elaine Ou, a blockchain engineer at Global Financial Access who attempted to take Libra for a test drive using a prototype released by Facebook.
The Libra Association
Facebook first announced Libra last month, when it introduced the Libra Association, a Geneva-based consortium of big-name “founding members” including Visa, MasterCard, PayPal, Stripe, Uber and Lyft. Despite that glitzy list, lawmakers clearly see Libra as Facebook’s thing — and crypto insiders doubt Libra can ever be truly “decentralized” like bitcoin and other cryptocurrencies are.
Libra and Calibra, Facebook’s subsidiary working on a digital wallet to store and send Libra, are both set to launch in 2020.
That timeline may be pushed back if regulators have their way.
“I'm hopeful that Facebook heard this today, heard the outcry from so many saying, ‘Stop. Don't do this,’” Senator Sherrod Brown (D-Ohio) told Yahoo Finance’s Jessica Smith following Tuesday’s hearing. “You should not be the new central bank for the world. We don't trust you to do that. You've betrayed the public interest so many times. You've broken that trust.”
Another, two-fold risk of Calibra potentially being downloaded by Facebook’s 2.4 billion users: the electricity needed to mine a cryptocurrency at that scale, and the possibility of hacking or failure of a financial network that large.
“I think that would be a very serious concern I would have as far as the environmental sustainability of the mining required. But then also just the security of the underlying electricity system necessary to power this scale of ambition. And I'm not sure Facebook has really thought all the way that far down the chain,” said Bryan Leach, CEO of mobile shopping app Ibotta.
Facebook’s Marcus is set to appear before the House Financial Services Committee Wednesday afternoon.
Julie Hyman is the co-anchor of On the Move on Yahoo Finance.