And that’s okay.
Our weekly editorial brought to you by a Coinme team member.
This week: Dom Garrett, Director of Engagement
Facebook released the white paper for their long-awaited cryptocurrency project. The stablecoin, Libra, will operate on a new blockchain (The Libra Blockchain), be backed by a reserve of assets (both bank deposits and short-term government securities) and will be governed by the newly-formed not-for-profit, Switzerland-based consortium called the Libra Association.
This association’s founding members include Mastercard, Visa, PayPal, Uber, Coinbase, eBay, and even Anderseen Horowitz. By the time the network is wholly launched in the early half of 2020, Facebook hopes to have 100 members in the association, each representing a $10 million investment in the basket of assets.
The token’s website lays out a lofty goal for the cryptocurrency: reinventing money. Per the site, users can store in a standalone app or with Facebook Messenger or WhatsApp and will be able to “send, receive, spend, and secure their money, enabling a more inclusive global financial system.”
This sounds encouraging but not everyone has been on board with Libra. Some have been quick to call out this as being a “fake” cryptocurrency, saying that the Libra Association is simply the central authority like a bank is now, and it is not as revolutionary as Facebook is making it out to be.
Andreas Antonopoulos, Bitcoin maximalist and author of ‘Mastering Bitcoin’, posted a detailed video explaining that if you look at the five core pillars of an open blockchain (open, neutral, public, borderless, censorship-resistant)this new offering falls short.
Based on his definition, what Facebook and the Libra Association are building in Libra and the Libra blockchain is not an actual cryptocurrency.
But honestly, that really doesn’t matter.
If this white paper proves to be accurate and Libra operates the way it is intended to, this will be the event we look back on as the cause of mass-market adoption for cryptocurrency.
Now, you might be sitting there and saying, “Dom, I don’t need to use Libra. I have better ways of sending money.” And you probably have a point…for yourself.
However, the current financial system is filled with intermediaries, high fees, and long waits to access funds that are a huge problem for hundreds of millions of people across the globe. The term “unbanked” is thrown around a lot, but as it is laid out, Libra has the potential to give an incredible amount of people access to a level of financial sovereignty they have never experienced. That alone should have the industry celebrating what Facebook is setting out to accomplish.
On top of that, people are failing to see is how much of an ally Facebook can become in the world of fighting for fair regulations. Yes, we appreciate the work governing bodies have done to protect users from companies like Facebook and their poor stewardship of data, but having the social media giant on this fighting for fair regulation of digital currency may potentially shift a significant level of scrutiny onto them as opposed to smaller companies in the space. Bodies like the SEC, CFTC, IRS and Congress will be asking questions of Facebook the Libra Association, and it is safe to you assume they will be much better prepared financially to handle those types of battles. Again should be viewed as a potential victory for business operating in this space.
It is true that Libra is not truly borderless like bitcoin and per FinCEN guidelines, users will be subject to the same Know Your Customer (KYC) and Anti Money Laundering (AML) regulations as any other financial institution or money transmitter (which is essentially what Facebook is becoming here), but that alone should not be the standard upon which success is measured. What Libra can do is provide a third of the world’s population (Facebook’s user base) with their first taste of what decentralized finance can do for them.
Think about it as a “gateway currency”. Sure, it might not be “pure crypto”, but if it gets people thinking about new forms of money, it is only a matter of time before they start researching bitcoin and other assets in the space.
The sheer potential behind this project is incredible, much greater in scale than anything we have seen before. It is easy to sit on twitter and scream about Libra’s faults, but when it comes to the problem of our broken financial system, there is no silver bullet.
Change happens gradually, and Libra is a step in the right direction.