Facebook shocked the world when they unveiled the Libra cryptocurrency project in 2019. It seemed clear that they intended to fundamentally change how money worked. Understandably, that intention rattled many governments and businesses. While many cryptocurrency projects claimed to do the same, Libra is different– as they believe Facebook may actually succeed. Upending the global economy is a threat to several major players. Even beyond that, public opinion of Facebook makes the average user wary of their control.
Now, after a torrent of backlash, Facebook released their plans for Libra 2.0. The new iteration significantly scales back the scope of the project. Unfortunately for Facebook, any currency project moving forward faces intense public scrutiny as a result of their first iteration. The alarm bells continue to sound over potential monetary supply disruption – and governments will not hesitate to regulate Facebook’s cryptocurreny out of existence if they misstep.
The original plan for Libra involved a single, unified currency. Libra would remain stable through a “basket” of national currencies in reserve. Unlike fiat currency, Facebook’s planned crypto would be globally available and easily transferable across borders – a hallmark of traditional cryptocurrencies. The idea of a single, global, digital currency spooked governments in the developed world. The ramifications for such a project could be immense.
In contrast, Libra 2.0 will be a series of stablecoins for most major fiat currencies. The unified Libra coin will still exist, backed by a series of these stablecoins. Rather than a globally-used digital currency, it would serve as a version of Libra for locations that do not have their own Libra stablecoin. The unified Libra coin would still serve for cross-border payments, but in a manner similar to other existing cryptocurrency projects.
Usurping Monetary Control
While sounding initially beneficial, a global currency comes with some severe drawbacks. It would certainly streamline many cross-border monetary transactions. It would also drastically increase banking availability for developing nations. After all, many countries use U.S. dollars as a de facto currency due to its stability.
However, that stability often comes due to intense governmental intervention. Since the beginning of the coronavirus pandemic, the U.S. government has poured trillions of dollars’ worth of resources into preventing economic instability. Adding a global currency above that level would prevent government intervention – many users would simply switch to the predominant currency to avoid fluctuations.
Article By: Adam Stone