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Libra Congress hearings: possible outcomes and implications

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Harju maakond, Tallinn, Kesklinna linnaosa, Tartu

The commentaries during and post-hearings are nothing but sceptical: “Libra comes under fire in Congress”, “Marcus is getting grilled”, “‘I don’t think you should launch Libra at all,’ congresswoman tells Facebook” and more alike. It is obvious that many questions came with pressure, Senator Sherrod Brown being a great example of those. However devastated David Marcus may have looked, we couldn’t expect anything else from the event: the hearings were mainly due to massive scepticism towards Libra concept, so the project’s representatives were not welcomed by default.

“Interestingly enough, doubts come from two fronts: one group of senators find the idea too risky and potentially loss-making for Americans, and demands that Facebook shed more light on its plans for the Reserve (in his note to the Congress David Marcus said the basket will have US dollars, Euro, British pound and Japanese yen) while the other is visibly afraid of Libra throwing a gauntlet to the US dollar questioning its stability and necessity,” Velvet.Exchange founder Vlad Smirnov says. The latter camp was recently joined by President Trump in his usual Twitter glory and wisdom.

“We are under the impression that Libra, even before it is born, is already seriously affecting the market,” Smirnov adds. This may look like a coincidence but Bitcoin has updated its market dominance high this week marking a 66%+ level, unseed since late 2017. Effectively this means the bears are betting heavily on Libra’s delay; if the project is seriously postponed due to regulators/legislators criticism, the market will receive a big and loud “no go!” type of signal clearly drawing a border between “crypto” and corporate. This would mean little or no risk for Bitcoin in its core and leading role.

However, if the Libra initiative survives through the hearings and beyond, it is very likely that the market see some uptrend move as well pricing in all those “new inflow” scenarios. Bitcoin role becomes more uncertain in that case but that is compensated by overall positive from the sector obvious liberalization.

The Congress hearings had couldn’t have any immediate and concrete results, they were merely aiming to present the public, regulators’ and legislators’ concerns over the idea. We would be expecting more direct news from the SEC, FINMA and FinCEN over coming months — that’s where real green light may come from. And it is highly unlikely that the project is prohibited by an act of law.

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