Is this the end of Facebook Libra? Facebook warns investors that Libra digital currency may never launch
Faced with intense scrutiny from governments and regulators in multiple jurisdictions, Facebook said its Libra cryptocurrency may not see the light of of the day, the social giant said in its filing with the Securities and Exchange Commission.
“Libra has drawn significant scrutiny from governments and regulators in multiple jurisdictions and we expect that scrutiny to continue,” Facebook said in its filing with the Securities and Exchange Commission.
Libra has made headlines over the past few weeks. However, Facebook may not launch the most talked about cryptocurrency in 2020 as originally planned. As we reported last week, the announcement has drawn criticism from governments and regulators here in the United States, Europe and around the world.
Just last week, U.S. Treasury Secretary Steven Mnuchin said that he had “very serious concerns” about cryptocurrencies, including the one being developed by Facebook. “This is indeed a national security issue,” Mnuchin told reporters at a press conference yesterday. “Cryptocurrencies such as bitcoin have been exploited to support billions of dollars of illicit activity like cyber crime, tax evasion, extortion, ransomware, illicit drugs, and human trafficking,” adding that Facebook’s Libra “could be misused by money launderers and terrorist financiers.”
Libra has already caused quite a stir among regulators and politicians across the world. Along with the difficulties with current regulations, the Federal Reserve expressed concerns about the consequences it would bring, while President Trump and Congress members have asked for a moratorium on development of the cryptocurrency until more is known.
In addition to the scrutiny, for the first time, Facebook acknowledged the technology challenges behind Libra. In the risk section of the SEC filings, Facebook admitted that Libra is based on a relatively new and unproven technology. ” Libra is based on relatively new and unproven technology, and the laws and regulations surrounding digital currency are uncertain and evolving. Libra has drawn significant scrutiny from governments and regulators in multiple jurisdictions and we expect that scrutiny to continue,” Facebook warned.
“As a primary sponsor of the initiative, we are participating in responses to inquiries from governments and regulators, and adverse government or regulatory actions or negative publicity resulting from such participation may adversely affect our reputation and harm our business.
As this initiative evolves, we may be subject to a variety of laws and regulations in the United States and international jurisdictions, including those governing payments, financial services, and anti-money laundering,” the social giant added.
Facebook went to explain that market acceptance of Libra is subject to significant uncertainty. As such, there can be no assurance that Libra or our associated products and services will be made available in a timely manner, or at all. We do not have significant prior experience with digital currency or blockchain technology, which may adversely affect our ability to successfully develop and market these products and services. “We will also incur increased costs in connection with our participation in the Libra Association and the development and marketing of associated products and services, and our investments may not be successful. Any of these events could adversely affect our business, reputation, or financial results,” Facebook said.
Libra is not only faced with unproven technology challenges, the company also mentioned the risks associated with international adoption of the crptocurrency. Facebook outline some of the international challenges, “We also outsource certain operational functions to third-party vendors globally. If we fail to deploy, manage, or oversee our international operations successfully, our business may suffer. In addition, we are subject to a variety of risks inherent in doing business internationally, including:
• political, social, or economic instability;
• risks related to legal, regulatory, and other government scrutiny applicable to U.S. companies with sales and operations in foreign jurisdictions, including with respect to privacy, tax, law enforcement, content, trade compliance, intellectual property, and terrestrial infrastructure matters;
• potential damage to our brand and reputation due to compliance with local laws, including potential censorship or requirements to provide user information to local authorities;
• enhanced difficulty in reviewing content on our platform and enforcing our community standards across different languages and countries;
• fluctuations in currency exchange rates and compliance with currency controls;
• foreign exchange controls and tax and other regulations and orders that might prevent us from repatriating cash earned in countries outside the United States or otherwise limit our ability to move cash freely, and impede our ability to invest such cash efficiently;
• higher levels of credit risk and payment fraud;
• enhanced difficulties of integrating any foreign acquisitions;
• burdens of complying with a variety of foreign laws, including laws related to taxation, content removal, data localization, and regulatory oversight;
• reduced protection for intellectual property rights in some countries;
• difficulties in staffing, managing, and overseeing global operations and the increased travel, infrastructure, and legal compliance costs associated with multiple international locations;
• compliance with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and similar laws in other jurisdictions;
• compliance with statutory equity requirements and management of tax consequences; and
• geopolitical events affecting us, our marketers or our industry, including trade disputes.
If we are unable to expand internationally and manage the complexity of our global operations successfully, our financial results could be adversely affected.”