The proposed digital pseudo-currency, Libra, is facing new opposition, as evidenced by a draft legislation designed to keep Facebook and other large tech companies out of the financial institution space and barring them from issuing cryptocurrencies.
Facebook is widely known for Libra, but the projected is actually under the guise of the Libra Association. The nonprofit operates out of Switzerland and includes many financial services organizations, including Visa, Mastercard, PayPal, and Stripe. It involves Facebook, eBay, Spotify, Uber, and Lyft. It also has blockchain and venture capital participants.
The explanation of Libra is vague and inconsistent, but looking at its partners, the real endgame may be to purchase government-back fiat currencies and design a blockchain-based amalgamated trading token. For example, if a bank holds dollars, euros, and yuan in sufficient quantities, it could manage the exchange rate fluctuations and make the tokens immune to trading vagaries. Residents of countries with unstable currencies would flock to the stable tokens and bypass their home currency to the greatest extent permitted by local law and practical access. With just a little technological legerdemain, most people could circumvent national barriers and gain access to the universal token.
In the short run, such a secure token would be a great solution to financial transactions, micropayments, and governmental instability. But such a consortium would quickly gain power well above that of some nations and risk market manipulation by this international consortium of corporate interests.
There is little societal benefit to a new organization with this kind of influence. And the effort shows the arrogance of these firms, proposing such a power grab at a time when governments across the globe are fearful of the oversized market power of these tech companies.
This may be a feint, however, with Facebook willing to abandon a project that means little to it as a strategy to show it is a respectful corporate citizen. Either way, regulators and the public need to be watchful.