The potential for Facebook’s cryptocurrency project, Libra, to be blockaded by regulators and governments is exceptionally high. However, a more significant threat is emerging to the social media’s company’s core business. According to ING CEO Ralph Hamers, banks could pull the plug on Facebook if it launches Libra.
The Financial Times has reported that Hamers’ believes that banks, as part of their duty to guard the financial system and prevent criminal activity, could cite Libra for illegal uses and thus punish the parent company, Facebook.
“We can take measures and exit the client, or not accept the client, so those are discussions you would have to have,” he said.
Hamers explained that banks such as his have a rather low-risk approach:
“We are such a large, regulated institution that you don’t want to risk anything. […] We’ve said we’ll take a look and see how this develops.”
If Libra does become a tool for money laundering or financing terrorist activities, as has been laid out as concerns from many different sources, banks would have an obligation to distance themselves from such a company that is operating in this manner.
Facebook is still moving forward with its Libra project, a recent meeting ratifying some of the Libra Association members, and their commitment to the platform. However, there are some key members that have ejected themselves from the project early.
The reason for the likes of PayPal, Stripe, and other payment processors leaving Libra has not been fully outlined, but they were receiving pressure from regulators not to be a part of the project – even US Senators weighed in.
Now, threats from the banks towards Facebook itself could have some major impact on the continued pursuit of this project. No doubt, Facebook will not want to jeopardize its banking in the light of a project already under such pressure.
That being said, this threat from Hamers is very circumstantial. Libra knows where they stand with regulators and have repeated time and time that they are pursuing regulatory correctness before advancing any further with Libra’s launch.
CEO of Facebook will be appearing in the US Senate tomorrow to testify on a hearing titled “An Examination of Facebook and Its Impact on the Financial Services and Housing Sectors.” This will no doubt center around Libra.
The hearing will be interesting to witness as it will be the CEO of Facebook on the stand rather than the heads of Libra itself. The value of Libra as a project of Facebook’s will surely become more clear through the voicing of Zuckerberg’s answers tomorrow.