{"id":4763,"date":"2019-10-14T10:31:48","date_gmt":"2019-10-14T09:31:48","guid":{"rendered":"https:\/\/www.newmoneyreview.com\/?p=4763"},"modified":"2019-11-05T19:30:41","modified_gmt":"2019-11-05T18:30:41","slug":"regulators-target-social-networks-planned-currency-launches","status":"publish","type":"post","link":"https:\/\/newmoneyreview.com\/index.php\/2019\/10\/14\/regulators-target-social-networks-planned-currency-launches\/","title":{"rendered":"Regulators block social networks\u2019 currency launches"},"content":{"rendered":"<p>Regulators are intensifying their efforts to prevent the operators of social networks from launching digital currencies that may subsequently prove hard to dislodge.<\/p>\n<p>During the last week, global financial regulators have announced new obstacles for the operators of two proposed new digital currencies, Libra and Gram.<\/p>\n<p>Libra, details of which were first announced in June, is a <a href=\"http:\/\/beta.newmoneyreview.com\/index.php\/2019\/06\/18\/zuckerberg-launches-his-global-currency-project\/\">consortium-based digital currency project<\/a> backed by Facebook. Libra is designed to be offered to the 2bn-plus users of the company\u2019s social networks, which include Messenger, WhatsApp and Instagram.<\/p>\n<p>Libra is <a href=\"http:\/\/beta.newmoneyreview.com\/index.php\/2019\/10\/09\/the-stablecoin-race\/\">a so-called stablecoin<\/a>, whose value will be pegged to a basket of underlying fiat currencies.<\/p>\n<p>Gram is a digital coin initiative from Pavel and Nikolai Durov, the operators of the Telegram messaging app, which has around 250m global users.<\/p>\n<p>Unlike Libra, the value of Gram would not be tied to any real-world currencies.<\/p>\n<p>Before launching Telegram in 2013, the Durov brothers founded and ran VK, Russia\u2019s most popular social media site.<\/p>\n<p>Facebook&#8217;s WhatsApp is <a href=\"https:\/\/www.messengerpeople.com\/global-messenger-usage-statistics\/\">the world&#8217;s most popular messaging tool.<\/a> Telegram <a href=\"https:\/\/telegra.ph\/Why-WhatsApp-Will-Never-Be-Secure-05-15\">says it is more secure<\/a> than WhatsApp. Iran and Russia have both blocked the use of Telegram within their territories. Some security experts <a href=\"https:\/\/www.schneier.com\/blog\/archives\/2018\/06\/russian_censors.html\">say neither tool is private<\/a>.<\/p>\n<p><strong>Regulators speak out on Libra<\/strong><\/p>\n<p>Global financial regulators are now exerting significant pressure on Libra, resulting in the withdrawal from the project of several key participants.<\/p>\n<p>On Friday, <a href=\"https:\/\/www.ft.com\/content\/a3e952dc-ec5c-11e9-85f4-d00e5018f061\">Visa, Mastercard, eBay, Stripe and Mercado Pago exited the Libra project<\/a>, joining PayPal, which quit a week earlier.<\/p>\n<p>The withdrawals followed threats from US legislators to Stripe, Mastercard and Visa to step up scrutiny of all their business activities.<\/p>\n<blockquote><p>\u201cIf you take this on, you can expect a high level of scrutiny\u201d<\/p><\/blockquote>\n<p>On October 8, two US senators, Brian Schatz and Sherrod Brown, <a href=\"https:\/\/www.schatz.senate.gov\/imo\/media\/doc\/Signed%20Letters%20re%20Libra%20to%20Patrick%20Collison,%20Ajaypal%20Banga,%20and%20Alfred%20Kelly.pdf\">wrote to the chief executives of the three companies<\/a>, saying that their continuing involvement in the Libra project would lead to countermeasures.<\/p>\n<p>\u201cIf you take this on, you can expect a high level of scrutiny from regulators not only on Libra-related payment activities, but on all payment activities,\u201d Schatz and Brown said.<\/p>\n<p>Separately, the chairman of the G20 Financial Stability Board, Randal Quarles, who is also the vice-chairman for supervision at the US Federal Reserve Board, warned on Sunday night of a host of potential new risks posed by stablecoins.<\/p>\n<p>Stablecoins \u201chave the potential to become systemically important, including through the substitution of domestic currencies,\u201d Quarles <a href=\"https:\/\/www.fsb.org\/wp-content\/uploads\/P131019.pdf\">wrote in an open letter<\/a>.<\/p>\n<p>\u201cThese include challenges for financial stability; consumer and investor protection; data privacy and protection; financial integrity including AML\/CFT and know-your-customer compliance; mitigation of tax evasion; fair competition and anti-trust policy; market integrity; sound and efficient governance; cyber security and operational risks; and an appropriate legal basis,\u201d Quarles added.<\/p>\n<p>The increased scrutiny of the Libra project by regulators comes as the consortium plans to hold its first board meeting in Geneva. Facebook has designed Libra as a not-for-profit Swiss foundation called the Libra Foundation.<\/p>\n<p>The FSB says it will provide a report on global stablecoins to the October 2019 G20 Finance Ministers and Central Bank Governors meeting, which takes place in Washington DC later this week.<\/p>\n<p>The FSB will also submit a consultative report to the G20 Finance Ministers and Central Bank Governors in April 2020, and a final report in July 2020.<\/p>\n<p><strong>A warning on Gram<\/strong><\/p>\n<p>Separately, the US Securities and Exchange Commission (SEC), the country\u2019s securities market regulator, announced on Friday night that it had filed <a href=\"https:\/\/www.sec.gov\/litigation\/complaints\/2019\/comp-pr2019-212.pdf\">an emergency action and obtained a temporary restraining order<\/a> against the operators of the Gram token sale.<\/p>\n<blockquote><p>The SEC alleges that Telegram and TON breached US securities law<\/p><\/blockquote>\n<p>According to the SEC, Telegram and its wholly-owned subsidiary TON (Telegram Open Network) began raising capital in January 2018 to finance the companies\u2019 business and develop the TON Blockchain.<\/p>\n<p>In the initial capital raising, said the SEC, Telegram and TON raised over $1.7bn by selling approximately 2.9 billion digital tokens called Grams at discounted prices to 171 initial purchasers worldwide, including more than 1 billion Grams to 39 US purchasers.<\/p>\n<p>According to the SEC, Telegram has promised to launch its blockchain and deliver the Grams to the initial purchasers no later than October 31, 2019. The SEC alleges that Telegram and TON breached US securities law by failing to register their offers and sales of Grams, which it sees as securities.<\/p>\n<p>The SEC has pursued a number of legal cases against the operators of what it sees as unregulated securities offerings, especially those that took place during the so-called <a href=\"http:\/\/beta.newmoneyreview.com\/index.php\/2018\/08\/13\/the-internal-contradictions-of-icos\/\">initial coin offering (ICO) boom<\/a> of 2017 and early 2018.<\/p>\n<p>Two weeks ago, Block.One, the developer of the EOS blockchain, agreed to a $24m settlement with the SEC. Block.One raised $4bn in the largest ICO to date, conducted from June 2017 until June 2018, a period that encompassed the peak of the cryptocurrency mania.<\/p>\n<p>While the SEC found Block.One in violation of federal securities law, the company agreed to the settlement without admitting or denying the agency\u2019s findings.<\/p>\n<p>According to an <a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2019-10-11\/sec-halts-telegram-app-from-flooding-u-s-with-its-digital-coins\">October 11 report on <em>Bloomberg<\/em><\/a>, Telegram is telling its investors that it is seeking ways to assuage the US regulators\u2019 concerns, including possibly delaying the launch of the TON network until after the October 31 deadline.<\/p>\n<p>However, if launched, TON would appear substantially more difficult for regulators to control than Facebook\u2019s Libra, which would have multiple interfaces with the traditional banking system.<\/p>\n<p>Telegram says <a href=\"https:\/\/telegram.org\/tos\/wallet\">it would have no direct control over its proposed blockchain network<\/a>.<\/p>\n<p><em>Don\u2019t miss any more New Money Review content:\u00a0<a href=\"http:\/\/eepurl.com\/du6eTr\"><strong>sign up here<\/strong><\/a>\u00a0for our newsletter<\/em><\/p>\n<p><em>Support New Money Review on <a href=\"https:\/\/www.patreon.com\/newmoneyreview\">Patreon <\/a><\/em><em>or <a href=\"http:\/\/beta.newmoneyreview.com\/\">in cryptocurrency<\/a><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Regulators are intensifying their efforts to prevent the operators of social networks from launching digital currencies that may subsequently prove hard to dislodge. During the last week, global financial regulators [&hellip;]<\/p>\n","protected":false},"author":4,"featured_media":4762,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1013,1053,1014],"tags":[1565,1055,1566,1471,1564],"class_list":{"0":"post-4763","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-account","8":"category-featured-1","9":"category-payment","10":"tag-durov","11":"tag-facebook","12":"tag-gram","13":"tag-libra","14":"tag-telegram"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v24.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Regulators block social networks\u2019 currency launches - New Money Review<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/newmoneyreview.com\/index.php\/2019\/10\/14\/regulators-target-social-networks-planned-currency-launches\/\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Regulators block social networks\u2019 currency launches - New Money Review\" \/>\n<meta property=\"og:description\" content=\"Regulators are intensifying their efforts to prevent the operators of social networks from launching digital currencies that may subsequently prove hard to dislodge. 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