Dive Brief:
- Facebook's name was absent from the Libra Association's post Tuesday announcing a bug bounty program to boost the security of the digital currency's blockchain.
- Although that tracks with Facebook executive and Libra co-creator David Marcus’s position that the company is "one of over a hundred members of the Libra Association" with no "special rights or privileges" to the currency, it runs counter to a request this week from the association's chief operating officer that partners "publicly" acknowledge their ties to the project.
- A pair of published reports in the past week highlighted the growing gulf between Libra and its backers: Three of the association's 28 members told Financial Times they've discussed how to distance themselves from the project or how to cut ties altogether. Meanwhile, the vast majority of partners failed to reaffirm their support for the venture when asked by Business Insider.
Dive Insight:
The distance stems from a swell of interest by regulators over how to police the currency. The European Commission sent questionnaires to Libra partners amid antitrust concerns.
In the U.S., the project landed on the radar of Securities and Exchange Commission Chairman Jay Clayton, whose agency may choose to define the currency as a security.
At issue is whether the coin, to be backed by multiple currencies and short-term government debt, would behave like an exchange-traded fund (ETF), which the SEC typically oversees.
If something looks and operates like an ETF, it should be regulated as such, Clayton told Bloomberg, not addressing Libra directly.
Marcus stressed in a July testimony before Congress that Libra wouldn’t operate like an ETF because its value isn’t meant to fluctuate.
SEC oversight could delay the currency’s anticipated 2020 launch, and the prospect of tighter regulation has lobbyists and other crypto exchanges on their toes.
"What we don't want to happen is members of Congress for the first time come in and author legislation that aims to go after Facebook and inadvertently takes out the other part of the industry," Kristin Smith, director of the Blockchain Association, a trade group, told Bloomberg.
Smith said her trade group talked with the offices of 60 lawmakers ahead of Marcus's testimony to distance Bitcoin from Libra.
Because Bitcoin's price can move up or down, it's more of a vehicle to store value than it is a currency, proponents said. In contrast, stablecoins, such as Tether, have a fixed price. This is an important distinction if a bill from Sen. Brian Schatz, D-HI, a draft of which was seen by Bloomberg, gains traction.
Schatz's bill aims to make it illegal for someone to create a digital currency intended to be used as money, that has a value based on assets held in reserve. The intent may target Libra but could have far-reaching consequences among stablecoins.
The Libra Association has 28 partners, including Visa, Uber and Spotify. But Facebook's perceived position as the project's lead — and the specter of its data privacy scandal — is likely prompting some partners to stay silent, to the frustration of Bertrand Perez, the Libra Association's managing director and chief operating officer. "It's time for us to speak up individually and collectively and build some momentum coming into the end of 2019," he wrote Monday in an email seen by Bloomberg Law.
The association, meanwhile, is working to improve the project.
Participants in the bug bounty program can earn up to $10,000 if they uncover critical security issues. "We want to help our researchers uncover issues while the Libra Blockchain is still in testnet and no real money is in circulation," said Michael Engle, head of developer ecosystem at the Libra Association, according to CoinTelegraph.
