The intention behind Libra, the cryptocurrency, is to facilitate global transactions seamlessly and provide a solution for the world’s unbanked population. Well, at least that seems to be the case so. Given Facebook’s history embroiled in user privacy, data breaches, etc., the U.S lawmakers, however, are skeptical of allowing the social network to go ahead with its plans.
Thus, Libra is under heavy scrutiny from the U.S. government and regulators around the world where it plans to do business.
Industry experts, however, believe that Libra will aid in the progress of blockchain industry. Cryptocurrency leaders think Libra could be what the U.S needs to keep itself ahead in the blockchain technology game and keep China and other countries from taking the top place in blockchain development.
Mark Zuckerberg, says, Libra “will extend America’s financial leadership as well as our democratic values and oversight around the world”. This sums up Zuckerberg’s intention behind launching Libra.
Libra is a cross-border payment system. Given the enormous size of Facebook, the cryptocurrency will have an unprecedented impact. The currency would operate through Facebook (with more 2.2 billion users) and WhatsApp using a digital wallet called “Calibra”. Facebook partners with heavy-weight American corporations similar to itself like PayPal, Stripe, Visa, Uber, Master card, etc. to take Libra to the world.
If Facebook continues with its plans, libra and blockchain together will change the face of the finance industry.
Here are some points that favor Libra —
1. Unlike other cryptocurrencies, Libra will be backed by currencies— the U.S dollars, The euro, the pound sterling, the Japanese Yen (bank deposits and U.S treasury securities). Therefore, it will be a stateless currency and a multiderivative of several currencies.
- It will be headquartered in Geneva, Switzerland. A country is known for its neutrality and financial know-how, which makes it easy for global policymaking.
This makes Libra truly disruptive in nature. Bitcoin, on the other hand, which has been widely used across the world, works as a good medium for exchange for trade has gained notoriety due to its volatile value. Therefore, it cannot work as a unit of account of a store of value, which is major function money has to perform. Libra will remain a stable coin.
This allows Libra to attain mass recognition and attainment.
Though Zuckerberg, clearly sees this vision, U.S policymakers’ views don’t seem to align with it. In a letter, several U.S. policymakers asked Facebook’s top decision-makers citing Libra may spark potential consequences citing national security, monetary policy, and privacy as concerns.
These concerns remain reasonable and justified. Here’s how.
The U.S is neither politically nor economically monolithic. In fact, the American polity is complex, which encompasses countless sectors whose interests are hard to reconcile. Facebook, of course, is a part of the country’s tech giants. However, it doesn’t necessarily mean the company’s individual interest aligns with the company’s interest.
Another barrier to Libra’s adoption is the challenge to traverse geopolitical tensions. No doubt, currencies involved in the development of Libra have robust GDP and well maintained financial network. However, looming adversities like NATO’s uncertain prospects and the decision to fine Google for anti-trust violations by European Union jeopardize Libra’s future from political view.
Further, cryptocurrencies are susceptible to cyber-attacks. Computational algorithms can be hacked to reprogramme it to the desired value. This will create instability and chaos. The cyberattack on NASDAQ by an alleged Russian intelligence, a few years ago, should be kept in mind to think that projects like Libra are not immune to attacks.
Contrastingly, the U.S dollar is not only backed by economic strength. Its global reserve status is preserved by armed forces including bombers, fighter aircraft, nuclear weapons, etc. While this can’t be said about Libra.
Libra presents an economic opportunity for the U.S and paves way for several other innovations. However, there are several questions raised by Libra which still need to be answered.