Abu Dhabi, UAEFriday 6 December 2019

There are still be-Libras in Facebook's cryptocurrency

Opposition to Libra from governments has been strong but Facebook and its allies are still progressing the technology

Libra's 'testnet' has been running for five months and has already lodged 51,000 transactions. Reuters. 
Libra's 'testnet' has been running for five months and has already lodged 51,000 transactions. Reuters. 

They say money makes the world go around. But, in the case of Libra, money makes the world go slightly hysterical. Politicians, central bankers, regulators, economists and business chiefs across the world have been brought into a state of frenzy by Facebook’s proposed new digital currency.

Some say that Libra will hail a new era of financial inclusion for billions of the world’s ‘unbanked’. For others, Libra represents little more than a neoliberalism nightmare in which private enterprise seizes control of our monetary sovereignty. One thing is for sure: by triggering this frenetic debate, agitation and uncertainty, Mark Zuckerberg’s goal of connecting the world is beginning to play out.

Given that a day in the life of Libra is the equivalent of a season of Game of Thrones — miss one week’s episode and you have no idea what’s going on — let’s take a quick recap of where we are in the story so far.

To call it a fairy-tale would be an overstatement. Of the 28 founding members of the Libra Association, seven have now defected, touting concerns over the regulation and feasibility of the project. On the regulatory side, Facebook has faced formidable opposition from US lawmakers who claim that the currency will be used, among other things, to facilitate monetary laundering and terrorist financing.

It has faced even greater hostility on the international stage. In September, France and Germany made a joint decision to block Libra on the grounds that “no private entity can claim monetary power”, and last year India took the general step of banning all non-sovereign cryptocurrencies.

Then there’s Facebook. Once the tech darling, the blue-faced social media giant is now caught at the centre of a web of privacy scandals, data breaches, fake news, clickbait, violent content and electoral interference. Little wonder that so many question whether Facebook — last year voted the world’s least trustworthy company — should be the champion of the first truly universal digital currency.

So yes, there have been more than a few bumps in the road. But is Libra treading the road of Cormac McCarthy’s post-apocalyptic dystopia or is it, in fact, on the road of yellow bricks walked by Dorothy and her faithful companions? Well, nobody quite knows. But we think there are good reasons to suggest that the situation isn’t as bleak as the neigh-sayers would have you believe.

Let’s first deal with the Facebook-shaped elephant in the room. Yes, Facebook has been mired in scandal, particularly relating to user data and privacy, but it is now tackling such problems head on across all of its platforms. In the case of Libra, this means that all transaction details and financial data will be kept completely separate from users’ social media profiles. And let us not forget all of what Facebook can offer this project. It’s financial muscle and enormous reach — with 2.5 billion active users, many of whom are located in the developing world — positions Facebook as perhaps the only company capable of delivering such a socially and economically ambitious venture.

We also think the widely-publicised Libra Association defections should be taken with a healthy pinch of salt. Four of the defectors are payments companies: MasterCard, PayPal, Stripe and Visa. Given that Libra has always posed to them an existential threat, it was fair to question their commitment from the outset. As such, their abandonment of the project is as unsurprising as it is calculated. Or, in the words of Libra chief David Marcus, “not great news in the short term, but in a way it’s liberating”.

On the other side of the coin, Libra still has the support of 20 global brands, with another 1500 companies who have applied to join. Other big-named advocates include Foxconn founder Terry Gou and Bank of England governor Mark Carney, who has publicly criticised “slow and expensive” online payment systems.

As the head of a central bank, Mr Carney’s support for Libra is somewhat surprising given the oft-stated contention that Libra undermines the monetary sovereignty of nation states. We wouldn’t presume to know Mr Carney’s true position on this issue, but it could be that he recognises the nature of this threat for what it really is: overhyped.

Firstly, the claim that Libra provides private companies with means to alter the value of currency is redundant since the majority of currency creation in the modern economy is already performed by private entities (i.e. commercial banks making loans) as made clear in a 2014 report by the Bank of England. Secondly, I would argue that Libra’s ‘stablecoin’ design — backed by a basket of low-risk, real assets — offers less volatility than individual fiat currencies and is less able to be used by countries as ammunition in currency wars. In this sense, Libra offers a distinct advantage to traditional monetary policy.

And, for those that are set on extolling Libra’s political clout, surely this represents America’s best weapon against a Chinese government with clear ambitions to control the digital currency space and the technological might to back it up. A digital renminbi, which could be launched in as little as six to 12 months, could set China on a path to monetary supremacy. This is now one of the key arguments being made by Mark Zuckerberg, who has warned that, “if America doesn’t innovate, [its] financial leadership is not guaranteed”.

So, Libra might be down, but it is far from out. Just last week, it was announced that the Libra testnet has been running for five months and “growing strong”, logging more than 51,000 transactions. The testnet has also developed 34 projects, including 10 wallets and 11 blockchain explorers. Customarily, this news was overshadowed by the wrangling of Libra’s many detractors, but it shows that behind the noise, Libra’s engines are quietly motoring forward.

So then, still a Libra-phobe? Hopefully not. A Libra-sceptic, maybe. Give it a year and, who knows, you might even be a Be-libra.

Ahmed Ismail is CEO and co-founder of digital asset platform HAYVN

Updated: November 25, 2019 07:51 PM

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