I'm going to deconstruct/translate today's mainstream announcement about Libra, FaceBook's upcoming digital currency, for clues about the direction of the global financial system. It's a narrative co-written by Libra's management and CNN Business, full of fluff, but sprinkled with clues I'll identify and decode.
We can't forget that only weeks ago, the governments of the developed nations announced stablecoins like Libra could completely take down the world's banks and economies.
For a long time, FaceBook has banned all favourable discussion of cryptocurrencies such as Bitcoin. Now, through a pretend interview with the very-photogenic David Marcus (former President of PayPal), we're shown hints at what they really have planned:
First, the majority of the text, cleaned up and rearranged.
(Feel free to skip down for a more concise version.)Marcus has been mulling the idea of Libra for years, since he first became interested in Bitcoin. "The hope at the time was that the volatility of Bitcoin will eventually stabilize and it would become a very good medium of exchange," he said. "For me, Bitcoin serves a purpose of being digital gold, not a good medium of exchange. And so it felt like this was the right time for us to start thinking about how we could address the very things that blockchain and cryptocurrency were meant to do and that we had real solutions."
He spent the past year developing Libra, a digital currency that would make it as easy and cheap to send money across the world as it is to send an email. Facebook was billing Libra as a way to unlock financial services for 1.7 billion people around the world who lack access to traditional banks. Not only that, but the opportunities to build products and businesses on top of the Libra network could be endless.
Facebook announced Libra, the Libra Association (an independent organization to manage the currency), and Calibra (a new Facebook subsidiary run by Marcus to develop products and services around Libra).
Criticism came swiftly. If Libra succeeds, it could revolutionize the way people use money. Many feared Libra could upend the global financial system, threatening the power of central banks or of government-backed currencies like the US dollar. The United States lacks a straightforward regulatory structure for cryptocurrencies, making it unclear who would be responsible for overseeing Libra.
Libra would give Facebook access to even more information about its users, though it says it plans to keep financial and social data separate.
Libra will be the sort of project that cryptocurrency proponents have envisioned for years but no one has been able to pull off yet. Existing cryptocurrencies struggle with wide swings in price or too little adoption to make them truly useful in everyday transactions.
Libra is a purely digital currency, able to be used by people around the world, with no foreign transaction fees and no control by a government or central bank. It's useful for such transactions as sending money to friends or buying things online because it is a "stablecoin" that avoids the kind of wild volatility experienced by other digital currencies such as Bitcoin. And it can be exchanged instantaneously with low fees.
Users will access Libra through digital wallets on their phone where they can send and save the currency. They'll get Libra by paying hard currency through a bank account or a local merchant, or by receiving it in digital transfers. The value of the currency will be backed 1:1 by a basket of government-backed assets managed by the Libra Association - likely the USDollar, euro, yen and stable debt instruments.
The Libra network will be run only by the Libra Association, unlike some other "permissionless" blockchain networks that anyone can join. This means Libra is not entirely decentralized; it's controlled by the Association rather than a government.
For such a product to be successful it needs to be widely adopted. This is where Facebook's scale gives it an advantage over cryptocurrencies: If even a third of Facebook's 2.4 billion monthly users adopted Libra, the currency would serve a population more than twice the size of the United States.
Marcus said it's for precisely those reasons that Facebook had an obligation to create Libra. "We can add so much value because we have distribution, we have WhatsApp and Messenger."
Among the people Facebook hopes to serve are underbanked or unbanked people, who live far away from banks, or who can't afford the fees. Many of those people do have cell phones with Facebook, and would benefit from financial services.
Marcus didn't want Libra, a product intended to be a global public good, to be managed solely by Facebook, so he created the Libra Association. FaceBook and a group of 20 other "founding member" companies (like Lyft and Spotify) will manage Libra and work with regulators. Marcus has one of five board seats but says the association plans to expand to 100 more diverse members by Libra's launch next year.
Libra is expected to enable more transactions between businesses and users on Facebook. In turn, Facebook hopes businesses will spend more on ads on the platform, boosting its bottom line. Calibra could eventually offer other financial services, such as loans.
Could Libra mean a future where Facebook becomes a bank? Marcus said that's not likely. Instead, Facebook plans to work with existing banks to provide such services.
While many experts agree there are inefficiencies in the existing financial system — like fees and long waits to process transactions — not all are convinced that sidelining legacy institutions with a product developed at Facebook is the way to solve them.
"There is this ideology of a tech fix for everything," said Mehrsa Baradaran, a finance expert and law professor at University of California. "We can bring Mark Zuckerberg to Congress and publicly shame him, but we can't vote him out. Where with the Federal Reserve, we have some public accountability.. why would we trust Facebook more than our own public institutions?"
Lawmakers and regulators are asking what a universal digital currency could mean for the global financial system, or the power of the US dollar.
All companies on the Libra network, including Calibra, will follow US anti-money laundering and other banking laws. Facebook and Libra's other backers have repeatedly said they won't launch the currency without regulatory approval. Marcus said planning with global financial regulators has been "very constructive."
Marcus also said that because all transactions on a blockchain network are permanently recorded, even when transactors' names are hidden, enforcement may be easier than with cash.
Some US lawmakers are now considering legislation that would bar Facebook and other big tech companies from operating cryptocurrencies altogether.
Marcus said there would be a cost to waiting to release Libra.
"The cost is much greater every day that the people we want to serve aren't served ... If you think about it that way, then there's just no better time. You have to act."
The 'meat' - translated, simplified, and paraphrased
Marcus has been mulling the idea of Libra since he became interested in Bitcoin. "The hope was that the volatility of Bitcoin would stabilize and it would become a good medium of exchange. For me, Bitcoin serves a purpose of being digital gold, not a good medium of exchange. It felt like this was the right time to start thinking about how we could address the very things that blockchain and cryptocurrency were meant to."
He spent the past year developing Libra to make it as easy and cheap to send payments across the world as it is to send an email. Users will access Libra through digital wallets on their phone (it will be an app, optimized for smart devices). Facebook is billing Libra as a way to unlock financial services for 1.7 billion people around the world who lack access to traditional banks. Not only that, but the opportunities to build businesses on the Libra network would be massive.
The Libra Association is an organization to manage Libra, and Calibra is a new Facebook subsidiary run by Marcus to develop Libra services. Facebook hopes businesses will spend more on ads on the platform, boosting its bottom line. Calibra could eventually offer other financial services such as loans.
Libra could revolutionize the way people use money. Criticism came swiftly. Many feared Libra could upend the global financial system, threatening the power of central banks or of government-backed currencies like the US dollar. The US hasn't clearly regulated cryptocurrencies yet, so a lot of money and power are up for grabs. Also, Libra will give Facebook access to even more information about its users, which it will freely dispense/lose/sell to hackers, third-parties, and the government.
Libra will be a faster and cheaper digital payment method than Bitcoin (ignoring the fact that several real cryptocurrencies are already cheaper and/or faster than Bitcoin). It's a purely virtual (not crypto) currency, able to be used by people around the world, with no foreign transaction fees and no control by a government or central bank. (Like there aren't hundreds of established cryptos that can say the same?) It's useful for sending money to friends or buying things online, because it is a "stablecoin" that avoids the kind of wild volatility experienced by Bitcoin. (Neglecting to mention stablecoins already exist, too.) And it can be exchanged instantaneously with low fees. (As if Libra will have a monopoly on instant transfers or low fees?) Existing cryptocurrencies struggle with wide swings in price or too little adoption to make them truly useful in everyday transactions. (For years, they've banned all favourable discussion of cryptocurrencies, hindering their adoption. Now they're using their lack of adoption as a reason to discredit them.)
Marcus didn't want Libra, intended to be a global public good, to be managed solely by Facebook, so it will be run only by the Libra Association, unlike some other "permissionless" blockchain networks that anyone can join. This means Libra is not entirely decentralized; it's controlled by the Association rather than a government (oh gee, that sure inspires confidence). FaceBook and a group of 20 other "founding member" companies (like Lyft and Spotify) will manage Libra and work with regulators.
The value of the currency will be backed by a basket of government-backed assets - likely the USDollar, euro, yen and stable debt instruments. (In other words, backed by fiat currencies which are themselves backed by nothing.)
For such a product to be successful it needs to be widely adopted. This is where Facebook's scale gives it an advantage over cryptocurrencies: If even a third of Facebook's 2.4 billion monthly users adopted Libra, the currency would serve a population more than twice the size of the USA. Marcus said it's for precisely those reasons that Facebook had an obligation to create Libra. "We can add so much value because we have distribution, we have WhatsApp and Messenger." Among the people Facebook hopes to serve are unbanked people, who live far away from banks or who can't afford the fees. Many of those people do have cell phones with Facebook, and would benefit from affordable financial services. (Sounds to me like they're taking advantage of vulnerable people.)
"There is this ideology of a tech fix for everything," said M Baradaran, a finance expert and law professor at University of California. "We can bring Zuckerberg to Congress and shame him, but we can't vote him out. Where with the Federal Reserve, we have some public accountability.. why would we trust Facebook more than our own public institutions?" (My only comment here is why does University of California's finance expert believe the Federal Reserve is a public institution with public accountability? How embarassing he doesn't even know the basics of what he claims to be an expert in!)
Could Libra mean a future where Facebook becomes a bank? Marcus said that's not likely, as Facebook plans to work with existing banks to provide such services. All companies on the Libra network, including Calibra, will follow US anti-money laundering and other banking laws. Facebook and Libra's other backers have repeatedly said they won't launch the currency without regulatory approval. Marcus said planning with global financial regulators has been "very constructive." He also said that because all transactions will be permanently recorded, even when transactors' names are hidden, enforcement will actually be easier than with cash.
Regulators are asking what a universal digital currency could mean for the global financial system, or the power of the US dollar. Some lawmakers are considering legislation that would bar Facebook and other big tech companies from operating cryptocurrencies. Marcus warned against delaying Libra. "The cost is much greater every day that the people we want to serve aren't served ... If you think about it that way, then there's just no better time. You have to act." (A bit of a threat, or ultimatum, suggesting that not launching Libra would be a crime against humanity.)
tl;dr (just the takehome message)
FaceBook sees an opportunity to seize more power and control by becoming an unofficial banking and investment corporation, piggybacking on the recent proliferation and success of real cryptocurrencies.
Libra will be held in and transferred between a wallet app mainly on smart devices. It will be inferior to many true cryptocurrencies, but pushed onto FaceBook's billions of users, immediately creating a potential userbase of hundreds of millions.
It will be backed by a basket of fiat currencies (themselves backed by nothing). It won't be decentralized (market controlled by FaceBook and their friends). It certainly won't be private (they admit/boast it will be less private than cash).
Libra is nothing more than a virtual currency (like Canadian Tire Money), controlled by one of the world's most evil companies, and backed by nothing except more government and corporate bullshit.
FaceBook is begging the US government to regulate cryptocurrencies such as their Libra, saying they won't go ahead otherwise. Indeed, they have a long history of demanding government oversight and regulation. It's as though Big Tech and the deep state are one and the same, only pretending to be separate entities, working together to control the people.
As a bonus, we learned that UofC's "finance expert and law professor" actually believes the Fed is accountable to the American people. (Should I tag this post under Comedy? You have to admit, that was pretty laughable!)
Comment
I am a happily unbanked person who will NEVER touch Libra or any other controlled state or corporate digital currency. To the world's unbanked: resist FaceBook's siren call, stay unbanked, and get some real cryptocurrencies to take back control of your finances.
Power to the people!
DRutter
PS: I did activism on FaceBook for many years, until they perma-banned me for discussing freedom of speech and censorship. I couldn't use Libra even if wanted to.
Libra is videogame gold, but less private, and more endorsed by the system. Pass.
Very interesting read, it makes me have a different perspective, like I feel there's more to this,...what if all this stiffling from the u.s government is just a front?
Yeah, what if? It sure seems like that's what is going on, unfortunately.
Thanks for your comment and welcome to level 38.
I like Canadian Tire money because it's paper lol but it's pretty worthless otherwise. I just threw some in the garbage. I won't miss it unless I need it to return something.
Too small to bother recycling.
Too dirty to clean my hempy act up with!
Verrrrry interesting! Upvoted and resteemed.
Interesting that Libra will be backed by fiat nothingness, and fully tracked by the authorities. What a technocrat wet dream - YUCK!
That guy is trying really hard to look young, trustworthy, and casual. It's interesting that he's headed PayPal and run some other major projects. He's really into digitizing the world, especially payments.
And the 'interview' sounded more like a friendly info distribution. No real questions asked, just newspeak disseminated.
Thanks for the "takehome message" ;) Why is it so hard to understand the difference between crypto currency and digital currency?
Probably because we haven't been using the terms long, and/or because there's a lot of misuse of the terms out there.
Not all digital currencies are cryptos but all cryptos are digital. Libra is "just" a digital currency, in that it doesn't have what it takes (like decentralization or privacy) to make a currency a crypto.
While no crypto has yet been created to be perfect, Libra is just complete garbage compared to what's out there on the free market already. The only reason it's going to succeed is because of their captive audience (2+ billion FaceBook drones who have been abused, censored, and lied to for years but remain loyal).
Epstein didnt kill himself