October 18, 2019
This morning I want to discuss the Libra project and the behavior of certain members of the U.S. government (without sliding too deeply into a political hole here).
Libra members are abandoning ship and Steven Mnuchin wants some credit for chasing big players out of the playground.
Seven of the Libra Association’s 28 “founding member” companies have now bailed out of the Facebook-led cryptocurrency consortium after months of grueling regulatory scrutiny of the project and its launch plans.
PayPal was the first to jump ship earlier in October. Now Visa, Mastercard, Stripe, eBay, and Mercado Pago have all followed last Friday; and this past Monday, Booking Holdings dropped.
Of course, when US Senators like Sherrod Brown (D-OH) and Sen. Brian Schatz (D-HI) do things like send threatening shakedown letters to participants, it’s easy to understand why MasterCard, Visa, and Stripe have dropped.
Seems a bit excessive to threaten them with the risks of increased regulatory scrutiny for backing Facebook’s venture. And now Treasury Secretary Steven Mnuchin wants some credit for the exodus.
But in an appearance on CNBC on Monday morning, Mnuchin said:
“I wouldn’t give them too much credit, because at Treasury we wrote letters as well. And we’ve been very clear, I’ve met with the representatives of Libra multiple times… we’ve been clear with them that if they don’t meet the standards of our money-laundering standards, and the standards that we have at FinCEN, that we would take enforcement actions against them. And I think the companies that dropped out realized that Libra is not ready, they’re not up to par, and I assume some of the partners got concerned and dropped out until they meet those standards.”
Mnuchin’s comments are interesting in light of the larger momentum against Libra from lawmakers on both sides of the aisle.
This should serve as a warning to anyone in fintech who wants to radically push the window.
Not only does Facebook face an uphill battle here for its plan to launch Libra in 2020, but now we have lawmakers and regulators jockeying to take credit for being the ones to stop Libra from launching in some sort of warped Ayn Randian alternate reality.
David Marcus, the Facebook executive in charge of crypto and blockchain, tweeted about the exits:
“I would caution against reading the fate of Libra into this update. Of course, it’s not great news in the short term, but in a way it’s liberating. Stay tuned for more very soon. Change of this magnitude is hard. You know you’re on to something when so much pressure builds up.”
The remaining members of the Libra Association gather this week in Geneva, and Facebook CEO Mark Zuckerberg will testify about Libra before Congress on Oct. 23.
Whether or not you like Facebook for other reasons, this is an important shift in how big government is flexing with big companies.
Is the upside potential of a corporate-backed private currency big enough to push the project offshore?
Time will tell, but in the end, you don’t find the future looking backwards – which is precisely what I believe the Federales are doing.
- Opportunity Zone Funds and 10XTS - February 24, 2020
- Opportunity Zone Funds - February 11, 2020
- More Libra Partners Bail Out and Mnuchin Wants a Cookie. - October 18, 2019
- Libra Me This, Libra Me That, Who’s Afraid of the Big Black Bat? - June 18, 2019
- Public Finance, the Next Fintech Frontier - April 24, 2019
- 18 Barriers to Enterprise Blockchain Adoption - November 5, 2018
- Why is Startup Capital Disappearing in the U.S.? - October 13, 2018
- It’s the transaction that matters, not the token - September 10, 2018
- What are some of the regulatory challenges for blockchain tokens in the Financial Services Industry? - September 3, 2018
- 10XTS “Tokenizing” its Traditional Corporate Shares as Security Tokens - September 3, 2018