Facebook's Crypto Proposal Triggers Fury in Congress: Bitcoin Fans Take Note

-edited

Republican and Democrat lawmakers demand hearings and a moratorium on Facebook's "Libra" cryptocurrency proposal.

After nearly a year of speculation, Facebook has finally unveiled its plans to Create a Cryptocurrency Called Libra and debut in 2020.

Details

  • The cryptocurrency will be managed by a separate Switzerland-based foundation initially backed by Facebook and 27 other organizations.
  • These organizations are known as Founding Members, and the foundation hopes to have about 100 of them by launch next year. They include businesses like Uber and Lyft, payments companies like Visa, Mastercard and Paypal, investors like Andreessen Horowitz and Union Square Ventures, and nonprofits and academic institutions like Kiva and Women’s World Banking.
  • In exchange for investing at least $10 million in the foundation’s reserves (which back the Libra token’s value), these members will get to run validator nodes for the Libra blockchain — "a rack of servers that will run transactions," as the foundation's currency chief describes it.
  • They'll also receive special Libra "investment tokens," which are different from the basic form of the cryptocurrency, and get a vote as part of the foundation’s council.
  • For some of these members, Libra may provide a new channel for acquiring customers. "If you’re Spotify [a founding member], you’re thinking about how there are a lot of people in markets you want to serve that don’t have an ability to pay you digitally," Kevin Weil, product chief of Facebook's cryptocurrency division, told Axios.

Swift Reaction

Bloomberg reports Facebook Triggers Fresh Washington Fury Over Crypto Project

Facebook Inc.’s plans to create a new cryptocurrency that can be used for everything from commerce to money transfers is facing pushback from angry U.S. lawmakers.

House Financial Services Committee Chairwoman Maxine Waters urged the company to halt development of the token until Congress and regulators can examine it. Other lawmakers demanded hearings and questioned whether the coin, called Libra, will have appropriate oversight.

“Facebook has data on billions of people and has repeatedly shown a disregard for the protection and careful use of this data,” Waters, a California Democrat, said in a statement. “With the announcement that it plans to create a cryptocurrency, Facebook is continuing its unchecked expansion and extending its reach into the lives of its users.”

Representative Patrick McHenry, the top Republican on the financial services panel, wants Waters to hold a hearing. He said Congress needs to go “beyond the rumors and speculations and provide a forum to assess this project and its potential unprecedented impact on the global financial system.”

Not Surprising

People knew the launch was coming. The reaction could hardly be a surprise.

What Is Surprising

The response from ZeroHedge was surprising: "What is most surprising is that she [Maxine] is, don't shoot us, right."

Either you believe in free markets or you don't.

What to Expect

The reaction by Congress shows the very real risk for Bitcoin.

If Bitcoin gets big enough, central banks or governments will squash it like a bug.

Those harping about hash rates, first mover advantage, etc., seriously underestimate the risks.

One of Two Things

  1. Bitcoin will fail on its own (or at least never become a serious currency threat)
  2. Governments will squash Bitcoin

Talk of million-dollar prices is seriously crazy. It would create mountains of trillionaires. Governments won't let that happen.

What Can Governments Do?

Easy. If threats to current monetary systems get serious enough, governments will bar payments in cryptos or conversion to dollars. That would be the end of it.

The excuse would be money laundering, tax evasion, a need to end speculation so people don't get harmed. etc.

In scenario 2, Bitcoin would become practically worthless, overnight.

In scenario 1, the valuation never gets high enough to support a regulatory crackdown. That's a far better fate, but it does rule out nonsensical targets.

How High?

I do not know, nor does anyone else.

As with gold, people proclaiming they "know" how high Bitcoin will get are either charlatans or fools.

For the record, I actually consider cryptocurrencies a legitimate investment vehicle, just a speculative one that I choose not to partake in.

After all, Bitcoin is a free market construct. But overzealousness and million dollar hype does not serve anyone.

People will get burnt badly over this.

Some already have. Lessons were not learned. They seldom are.

Mike "Mish" Shedlock

Comments (17)
View Older Messages
bradw2k
bradw2k

Short-term I'd guess dollars will pile into Bitcoin early in the next crisis, same as gold but with much higher whipsaw.

KidHorn
KidHorn

The only way I see crypo currencies surviving is if the gov't takes a large cut of the operation and has control over it. There's no way they would allow a currency they can't heavily tax or create out of thin air.

Thalamus
Thalamus

I despise and don’t use Facebook, but I think in their lust for power they are trying to take over banking, which is the devils business. Of course Maxine the sycophant would be upset on behalf of the devil. Even though Libra is not purely decentralized, it will have a permission system with large players initially and then move to a decetralized system later on (prob not). Just getting a use case for crypto’s in a large scale setting will be a win for the people and a loss for the banker thieves.

Blacklisted
Blacklisted

If one understand the motivation behind the creation of BTC and Lybra, as well as the move to hard (private) assets in the coming monetary crisis (2021-2022), then one can have a clue as to why the govt will back Lybra. Western govts are doing their best to eliminate cash to prevent hording it and being able to tax everything. You also have half the world that is bankless, and those people must be captured by govt to increase control/power. Lybra is meant to help accomplish this sick goal. Crypto developers know all of this, because they understand where govt is going and what the consequences will be, even if govt does not.

When you say "govt will not allow this or that", you are ignoring history. If this were true, there never would have been revolutions. Govt doesn't think so, but people do have limits. Ask the politicians in IL, who are losing their tax payers quickly.

Let me ask a simple question to demonstrate my point. If the govt bans guns, do you think the Patriots are going to turn them in, even if THE GOVT WOULD NOT ALLOW IT? Likewise, the govt will start a revolution if they try to take away cash, or force people into a govt-backed crypto, and they only way they can stop Bitcoin is to shut down the internet, which also destroys themselves. The creativity and will of the individual WILL ALWAYS DEFEAT GOVT, especially in the USA, where the 2nd Amendment will never die.

leicestersq
leicestersq

Bitcoin may well fail, but I take issue with this Mish.

"If Bitcoin gets big enough, central banks or governments will squash it like a bug."

In my opinion, whoever designed Bitcoin was a genius. Bitcoin can be squashed through a determined effort, but it would have to be incredibly determined given the technical design of bitcoin. Solving the Byzantine General's problem has, as I understand it, allowed soul of Bitcoin to be split up into thousands of pieces, a bit like Voldemort's soul in Harry Potter. And like Harry Potter, you need to destroy enough of those split souls in order to kill Bitcoin.

If you want to take down Bitcoin, you therefore need to have sufficient untrustworthy computers interfering with the validation mechanism of Bitcoin, or perhaps physically take down all of the computers on the internet that are using it. Or just shut down the internet. That would take one massive determined effort. It would be closer in difficulty to the D Day invasion than a bug squash.

FWIW, I think that the plethora of alternative cryptocurrencies is an attempt by the same authorities to discredit Bitcoin by swamping it with silly alternatives. I dont think that approach is working. Bitcoin has so far proved very resilient.

WildBull
WildBull

It's an electronic private banknote convertible into most everyone's local currency. It is still a fiat currency backed by other fiat currencies and controlled by multinational corporations, as opposed to governments. I can't see that it would be better or worse than government fiat.

The rise of bitcoin and its kindred is a symptom of growing distrust of the current system. Just how it is a hedge against the problems of the current system escapes me, though.

EWM
EWM

"Governments will squash Bitcoin" and the Chinese government is going to extradite people from Hong Kong...Oh wait... https://www.youtube.com/watch?time_continue=7&v=9PAINpC9FVc

Zof
Zof

The banks have never tried to kill anything as hard as they've tried to kill bitcoin. It's quite frankly hilarious how badly they've failed. Bitcoin has clearly won. Bitcoin is smarter than the banks lol. I mean, duh. The only thing the banks can do now is occasionally have their petty lapdogs write childish little boohoo stories saying mean things about Bitcoin as it soars in value, humiliating them once again.