Libra — Game Changer or Deal Breaker?
The tech behemoths in Silicon Valley will take the helm of world economy one day. This pessimistic sentiment, shared among Wall Street moguls, was further deepened when Facebook announced its plan to launch a new blockchain digital currency named Libra.
The project, currency and transactions are to be controlled by an independent body, the Libra Association. The Association currently consists of 29 founding members (including Facebook). The Libra’s value will be pegged to a basket of major currencies and US Treasury securities in an attempt to avoid volatility. Each Libra will be covered by liquid means. For every Libra that will be issued, the Libra Association will have to maintain a basket of short-term government bonds and fiat currencies.
The global reactions toward the announcement of Libra run the gamut from abuse to applause. French government is among the most vocal critics of the plan, with its Finance Minister going so far as to say that “Libra cannot … and must not happen”.
Facebook made no secret of its ambition to make Libra a global currency. It is meant to become the in-house currency for Facebook, Instagram and WhatsApp’s combined 2.7 billion users. However, US lawmakers have asked Facebook to “immediately cease implementation plans” of its Libra stablecoin last month, citing legislative issues and unforeseen risks.
Many are concerned that if tech giants (such as Facebook, Google, Apple or Amazon) become major players in the currency markets, the financial system may be subject to instability.
Economic sovereignty of governments should also enter the equation, the reason why many central banks remain skeptical or reticent about the planned crypto launch.
Other observers voiced optimism toward the stablecoin release. Katharina Pistor, the Edwin B. Parker Professor of Comparative Law at Columbia Law School, stated that Facebook’s Libra is “designed to become a new global currency that will complement existing fiat currencies”. She pointed out that Libra’s streamlined and “elegant” design “could eliminate a lot of things. It could be a lot cheaper. It could just be a much better system for many customers.”
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