• WB King

Facebook’s Libra Ignites the Cryptocurrency Debate for CUs, Lawmakers

Updated: Oct 3, 2019



By W.B. King


Whether or not a credit union considers Facebook a “friend” is relative, but with the recent announcement of Libra, the Facebook sponsored decentralized blockchain cryptocurrency, the social media power house is putting financial institutions on notice.


“Libra holds the potential to provide billions of people around the world with access to a more inclusive, more open financial ecosystem. We [Facebook] look forward to participating in the Libra network as a founding member,” said David Marcus, former president of PayPal and the current vice president of Messaging Products at Facebook. “We know the journey is just beginning, but together we can achieve Libra’s mission to create a simple global currency and financial infrastructure that will empower billions of people.”


Libra won’t technically be Facebook’s cryptocurrency, but rather it will be helmed by the Geneva, Switzerland-based Libra Association, which Facebook co-founded. Serving as a monetary authority for the cryptocurrency, the Association’s goal is to, among other initiatives, “empower” the approximate 1.7 billion adults worldwide without bank accounts. Additionally, the founding members, which near 100 companies, will be tasked with creating a charter and governance regulations that will be heavily securitized by national and international governmental agencies before the intended rollout in early 2020.


Facebook is joined by countless other founding members, including MasterCard, Visa, PayPal, eBay and Coinbase. PayPal’s President and CEO, Dan Schulman, said the company believes in “democratizing participation in the digital economy for people from all walks of life and businesses of all sizes.” He continued. “PayPal is pleased to join other leading technology and financial services organizations to form Libra, with the goal of exploring a new, global digital currency, built on blockchain technology.”


What Libra Means for Credit Unions


While a permissible distributed ledger is theoretically supported by many industries, adoption rates in the U.S. have been slow due to concerns regarding user verification issues and authentication hurdles. Libra is facing the same concerns. To this end, U.S Federal Reserve Chairman Jerome Powell and legislators representing both parties expressed trepidations about Libra in early July.


“I think we agree that Libra raises a lot of serious concerns and those would include around privacy, money laundering, consumer protection, financial stability,” Powell said while addressing the Senate Banking Committee. “Those are going to need to be thoroughly and publicly assessed and evaluated before this proceeds.”


In an effort to remain relevant in this space, there are forward-leaning organizations in the credit union industry that are trying to develop CU-only blockchain platforms. How these solutions will integrate with considerably larger global cryptocurrency models remains questionable, explained Dr. Russ Hittinger, a crypto economies and strategy consultant with NetQash. A better approach, he portends, is the credit union industry working with larger players in the crypto-space instead of trying to go it alone.


“Giant banks like JP Morgan and Citibank are pursuing partnerships with Silicon Valley titans to dominate the financial technology and banking industry of the future,” noted Hittinger. “CUs and local FIs are becoming prime targets due to their woeful lack of preparation for the cryptocurrency-influenced financial ecosystem of the future, in which cryptocurrencies will likely become common compliments to national fiat currencies.”


Only time will tell whether Libra will become as ubiquitous as having a Facebook account or if a credit union sourced blockchain platform will be the David to Facebook’s Goliath. But what remains certain is that these permissible distributed ledger entities will have to prove to governing bodies that respective platforms provide secure authentication methodologies. The Senate Banking Committee and House Financial Services Committee, for example, are scheduled to hold hearings on Libra implications in mid-July.


“The idea that this [Libra] would be going into implementation within 12 months, I think, is not going to be proven right,” Powell said. “I think we’re going to take more time than that. The size of Facebook’s network [2.3 billion users] means it could be, essentially, immediately systemically important. This should be subject to the highest level, the highest expectations in terms of privacy but also prudential regulation.”

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