Big Bad Libra

No sooner did Facebook Inc. pull the covers off its Libra cryptocurrency project this past June than the social-media giant ran into a buzzsaw of criticism—from Congress, central bankers, the press, and seemingly right-thinkers everywhere on the planet. Seldom has a payments announcement—let alone one that has to do with digital money—drawn so much worldwide attention, let alone blowback.

By September, Facebook was hauling itself off to Europe to face an inquisition from central bankers and company officials were making soothing assurances that Libra would not go forward until everyone was satisfied.

To be sure, Facebook hasn’t done itself any favors with its privacy lapses and other dubious business practices. And, to be sure, no outsider can know the inside dope on what Libra will do for Facebook, for the other 27 companies backing it, and for money and payments generally (for much of the background on this, “Under the Sign of Libra,” this issue).

But let’s look at a few facts and see if we can get an idea of just how big this bogeyman really is. Libra, when it finally gets traded, will be an open-source cryptocoin that will ultimately operate on a so-called permissionless blockchain. That means, first, that any entity whatever can build applications on top of the Libra codebase. Second, within five years, any entity—not just those with “permission”—will be able to run nodes on the network. The stifling hand of all-powerful Facebook certainly looks menacing in that.

Further, Libra will offer a currency anyone in the world can send to anyone else in the world at costs that should be considerably less than what they pay now for remittances. Competition—if the viewers-with-alarm allow it to happen—is likely to ensure that. Companies will be able to put digital wallets into the hands of these folks and of anyone else who want to trade in Libra. Facebook itself is working on just such an app called Calibra.

And, speaking of so-called faster payments, these transfers are likely to zip along in seconds if the underlying blockchain can avoid the kind of congestion that has plagued Bitcoin.

So there remain a couple of other concerns: what nefarious purpose Facebook really has here; and what injury Libra will do to the world’s monetary system. There’s not enough space to do justice to the second item, except to say, can Libra do worse than national currencies, which governments may inflate at will?

As to the first concern—neither Facebook nor any other company operates contrary to the interests of its shareholders. If those interests happen to align with those of Joe Everyday, what regulator can object?

—John Stewart, Editor, john@digitaltransactions.net