regulatory-compliance

This chapter provides an overview of Facebook's Libra project, explaining its intended function as a digital payment system with its own currency backed by a basket of national currencies. It highlights the practical user experience, privacy concerns, regulatory challenges, and the contrast between Libra's original ambitious cryptocurrency vision and its more limited fallback as a PayPal-like system integrated with Facebook. The chapter critically examines Libra's promises, potential benefits, and the skepticism surrounding Facebook's motives and the project's feasibility.

In July 2019, Facebook's David Marcus testified before the US Congress amid bipartisan skepticism about the Libra cryptocurrency project, with legislators expressing deep concerns about Facebook's trustworthiness, regulatory compliance, and the systemic financial risks Libra posed. The hearing revealed widespread confusion and criticism regarding Libra's governance, transparency, and potential to disrupt the financial system, with calls for enhanced oversight and direct accountability from Facebook leadership. Lawmakers emphasized the need to distinguish Libra from genuine decentralized cryptocurrencies and highlighted the political and regulatory challenges of managing a Facebook-scale private currency.

In October 2019, Facebook's Libra project encountered significant setbacks as major payment processors like Visa, Mastercard, and PayPal withdrew amid heightened global regulatory scrutiny and concerns over compliance, financial sovereignty, and systemic risk. Despite the official formation of the Libra Association and public defenses by David Marcus and Mark Zuckerberg, skepticism remained about the project's viability without Facebook's dominant role, culminating in Zuckerberg's critical congressional hearing that underscored the challenges of balancing innovation with regulatory and governance demands.

Mark Zuckerberg testified before the US House Committee on Financial Services about Facebook's Libra project, facing bipartisan skepticism rooted in Facebook's past misconduct and concerns over regulatory compliance, financial stability, and governance. Lawmakers questioned the feasibility of Libra as a private global currency, its potential risks, and its geopolitical implications as a counter to China's digital currency ambitions. Ultimately, Zuckerberg failed to convince the House to approve Libra and shifted focus to Facebook's new initiative on news and journalism, launched shortly after the hearing.

The chapter explores the emergence and development of central bank digital currencies (CBDCs) as government responses to the challenges posed by private digital currencies like Facebook's Libra. It details early CBDC experiments worldwide, the technological and regulatory hurdles faced, and how Facebook's Libra project evolved under intense regulatory scrutiny, ultimately transforming into a permissioned, compliance-focused payment system. The chapter also reflects on Facebook's prior virtual currency attempts, the critical role of trust and regulatory compliance in digital currency adoption, and the broader political and privacy concerns surrounding digital currencies.