Libra Cryptocurrency

Facebook recently released a white paper on its new cryptocurrency, Libra.

After years of speculation, Facebook finally released a white paper detailing their plans for a cryptocurrency, called Libra. Certain aspects of the white paper seemed calculated to dispel fears and provide some distance between Libra and Facebook, with a public image tainted by the Cambridge Analytica data privacy scandal. 

Libra will offer relatively stable value, supervised by an association of corporations that includes Facebook.

Like many other cryptocurrencies, Libra will rely on blockchain technology to complete transactions securely. Libra will distinguish itself, however, by offering stable value overseen by the Libra Association, a nonprofit group that will supervise Libra and provide a supporting reserve of fiat currency. The members of this organization include well-known financial services companies and venture capitalists, as well as Facebook. Members must pay at least $10 million to join the consortium. In return, they’ll receive one vote and a share of interest earned on the Libra reserve, distributed in proportion to their level of investment. Libra reserve won’t be pegged to a single currency but rather, a basket of global low-volatility assets managed by the association. Users will transfer real-world currency into the pooled reserve, and the association will then mint the equivalent amount of Libras. Users can always get real-world money for their Libras, which will then be “burned” from existence to ensure that all available Libras remain backed by the association’s reserves. 

Governments and central banks have concerns and may try to regulate Libra. 

If it catches on, Libra could potentially disrupt the global financial order, providing service to billions of unbanked individuals and eventually supplanting sovereign currencies. Central banks and governments have reacted with concerns about user privacy and the potential use of Libra in crime. Although it’s possible to dismiss these objections as stodgy hand-wringing and resistance to progress, there are valid reasons to worry. Many people turn to cryptocurrency because they find it democratizing, but Libra could actually have the opposite effect by further consolidating power in the hands of nonelected corporate tech entities. It also remains to be seen exactly how Facebook will profit and whether the way it does profit will prove problematic.