The US congress holding hearings on Facebook’s plan for a possible digital coin suggests that the high-profile debut for libra was likely a public relations effort gone bad.
That’s according to MoffettNathanson analyst Lisa Ellis, who said in an e-mail that the “fact that these hearings are even happening is a good indication that the splashy/hyped libra announcement last month was likely poor PR strategy on Facebook’s part”.
“Libra isn’t anything yet — it’s a white paper about a potential Swiss research experiment to test out the use of cryptocurrencies as a potential solution for the instability of fiat currencies in high-inflation countries,” she said.
In her opinion, that’s “a perfectly valid experiment for Facebook to be involved in, and not at all one that members of the US government should have any reason to comment on (or care about)”.
She added that a company would typically announce something with such an “experimental nature” at an industry forum, like the Money20/20 conference, not with a “massive general media blitz”. Perhaps, she said, Facebook “thought announcing libra the way they did would distract from its broader privacy problems”. Instead, it seems “that was likely a misguided strategy, as it has so far only fanned the flames”.
In recent days, libra has been pummelled by US President Donald Trump, Federal Reserve chair Jerome Powell and a host of international regulators. Even Citigroup CEO Michael Corbat took a shot at the plan during his bank’s second quarter earnings call. “There are some redeeming, qualitative aspects that are appealing,” Corbat said, though there are also other aspects that might raise some questions.
On Monday morning, Facebook said it won’t launch libra until regulators’ concerns are fully addressed. David Marcus, the Facebook executive on the project who’s due to appear before both houses of the US congress to discuss the project this week, said the cryptocurrency isn’t intended to compete with countries’ national currencies, and won’t interfere with central banks on monetary policy.
Marcus made the reassurances in testimony prepared for a Tuesday hearing before the senate banking committee. On Wednesday, he’s slated to testify before the house financial services committee, where chairwoman Maxine Waters has called for a moratorium on the project. — Reported by Felice Maranz, (c) 2019 Bloomberg LP