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August 23, 2019
Like cockroaches scattering from the light, bankers are reportedly high-tailing it away from Facebook’s venture into cryptocurrency.
Some might have been excited by the prospect of working with one of the worlds’ most recognisable companies in an exciting new sector, blending traditional banking with the innovation of technology, but it now appears the Facebook brand is toxic. So toxic, not even bankers will get involved.
According to the Financial Times, three of the early backers of Facebook’s potential cryptocurrency are attempting to put daylight between themselves and the social media giant. Regulatory scrutiny and public criticism seems to be hitting levels which are intolerable for an industry which is not usually afraid to get its hands dirty in the pursuit of profit.
“I think it’s going to be difficult for partners who want to be seen as in compliance [with financial regulators] to be out there supporting [Facebook and Libra],” one of the backers said anonymously.
Another suggested more conversations should have been had with the relevant authorities and regulators before Facebook pushed forward. The social media giant has seemingly attempted to enter the financial world without thinking the strategy through or understanding there might be reservations with a company where the recent record for data protection and privacy is somewhat tarnished (putting it kindly).
This appears to be one of the problems which Facebook is facing. Because it allegedly did not have conversations with financial regulators prior to making an announcement, it has been facing backlash ever since.
Looking at the regulatory scrutiny being placed on the initiative, the list is almost growing by the day.
The UK’s Information Commissioner’s Office joined the list earlier in August, asking how customers’ personal data will be processed in line with data protection laws. Switzerland’s data privacy regulator asked for information from Facebook after it was told by the social media giant it had been chosen as the body to keep a steady eye on Libra compliance. Others to request information include regulators from Australia, the USA, Canada, Burkina Faso and Albania.
Earlier this week, Bloomberg suggested the European Commission was also weighing into the debate. The antitrust team are allegedly concerned the Libra currency could shut out rivals and create competition restrictions regarding the use of data. This investigation will also look into the integration of Libra into Facebook’s WhatsApp and Messenger services.
Like many other regulators and governments around the world, the financial bodies here want reassurances Facebook is able to act responsibly and in accordance with the law. Unfortunately, as there are few laws to govern the existing cryptocurrency segment, this might be harder than most would assume.
Facebook has a tarnished reputation at the moment, and the number of people who are looking sceptically at CEO Mark Zuckerberg is increasing. As Facebook looks to enter one of the most sensitive and trusted industries around, this is not an ideal position.
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