The hype around the social media giant’s proposed foray is fading as questions come in from multiple sides
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Bitcoin’s rally has taken a hit as Facebook’s plans to create a viable cryptocurrency ran up against lawmakers.
“The price of bitcoin recently slid to about US$9100,” reported The Wall Street Journal, citing cryptocurrency research site CoinDesk. “Before bouncing back later Wednesday, it had lost almost a third of its value after trading above $13,000 a week ago, which was near its high for the year.”
The fall in the world’s most popular cryptocurrency coincided with criticisms of Facebook’s ambitious plan to release its own digital coin called Libra with backing from large financial companies including Mastercard and Paypal. Excitement over the plan, which stoked some hopes of widespread cryptocurrency adoption and legitimization, had been tagged as a primary tailwind in Bitcoin’s earlier rally.
Last week, US Federal Reserve Chairman Jerome Powell said he had serious concerns about the plan. President Trump weighed in on the issue by blasting Bitcoin and saying Libra would have “little standing or dependability.”
Another blow to the crypto industry came over the weekend from a brief “fat-finger” error that instantaneously generated more than US$5 billion of Tether, a cryptocurrency that’s pegged to the US dollar. The sudden doubling in its circulation spooked the market, driving down the price of Bitcoin by some 12%.
Monday brought another voice to the chorus of skeptics as US Treasury Secretary Steven Mnuchin raised national security concerns about Libra, adding that cryptocurrencies had previously been used for illegal means.
On Tuesday, US Senators questioned Facebook’s ability to manage a global cryptocurrency, partly because of the absence of a clear regulatory framework governing digital assets. A particularly disparaging remark from Democratic Senator Sherrod Brown compared the social media giant to a “toddler who has gotten his hands on a book of matches.”
US lawmakers weren’t the only ones with doubts over the benefits of Libra. In a note released Tuesday, analysts from Morgan Stanley wrote:
