The pushback that Facebook’s cryptocurrency Libra has faced since it was announced last month is a classic example of a poorly managed product launch.
This was the conclusion drawn by Federal Financial Analytics’ managing partner Karen Petrou when she appeared on CNBC’s Closing Bell show.
Per Petrou, the manner in which Facebook unveiled its cryptocurrency was incompetent at best. This was borne out by the fact that it had unified political rivals such as Republican President Donald Trump and Democrat Maxine Waters, the chair of the U.S. House Financial Services Committee, in opposing Libra:
You’ve got to admit that this is about the world’s worst product launch ever. To bring out President Trump, chairwoman Maxine Waters and now the Treasury Secretary along with the Bank of England, the head of the Federal Reserve Board and many other top policymakers to tell Facebook that they don’t feel good about this is sending a real message.
Only Libra could do this – Donald Trump, Maxine Waters in complete agreement. https://t.co/lYsbPvSUFH
— Karen Petrou (@KarenPetrou) July 12, 2019
‘Move fast and break things’ MO comes back to haunt Facebook
In Petrou’s view, one of the reasons why Libra has faced a backlash is that Facebook had skipped on the groundwork that traditional providers of financial services normally have to undertake. This includes glossing over money laundering and national security concerns.
Petrou also expressed doubts that Facebook would be able to proceed with rolling out Libra in the developing world in the event that countries such as the U.S. and the U.K. shut their doors on it. According to Petrou this is because the global financial system is highly intertwined.
The continuing backlash against Facebook’s planned cryptocurrency comes as the social media giant’s representatives prepare to hold Congressional hearings this week. With Facebook already facing privacy violation accusations on its various social media platforms, lawmakers will be especially interested in finding out how the customer data belonging to Libra users will be handled.
Will Libra meet the expectations of regulators?
On Monday Treasury Secretary Steven Mnuchin expressed concerns over Libra while noting that Facebook will only be allowed to access the financial system of the U.S. after convincing regulators that it has abided by ‘very high standards’.
According to Reuters, lawmakers have also expressed frustrations over Facebook’s lack of clarity regarding its cryptocurrency plans. The U.S. Senate Banking Committee had reportedly sought information from Facebook pertaining to the plans a month prior to Libra being announced, but the tech firm only replied last week. But even after getting a reply some of the Committee members indicated they were not satisfied with the answers they had received.
Across the Atlantic, the Bank of England governor Mark Carney had from the onset stated that Libra would have to meet the ‘highest standards’ before being granted access in the U.K. While Facebook has famously built a reputation for moving fast and perfecting its ideas later, Carney recently hinted that such a modus operandi would not work in the financial services sector.
No room for Libra to experiment
Per the BoE governor, there was no room for ‘teething issues’ with regards to a payments system. Facebook’s cryptocurrency, therefore, has to be ‘rock solid right from the start’ or it will never see the light of day.
In France, the country’s central bank governor voiced money laundering concerns with regards to Libra saying that it would not be allowed to nullify the gains made in fighting the vice:
It’s out of the question that this means of payment leads to regression on all of the international progress made against money-laundering.