Imad al-din Payande
Libra, Facebook’s digital currency, with its official white paper released in June, has been in the limelight ever since. At the outset, Facebook sought to form a coalition along with 27 other prominent companies to introduce their digital currency on a worldwide scale; digital economy giants such as Uber, Visa, eBay, and MasterCard. were said to be among the alliance partners. Facebook, based on its announcement, will unveil Libra in mid-2020. So far, It has lost seven of its partners in less than a month after severe rejections of U.S. Congress and the ongoing debate with Federal Reserve: PayPal, Visa, Mastercard, Stripe, Mercado Pago, Booking Holdings and eBay. But 21 remaining partners, including Uber, Spotify, and Vodafone, still having Zuckerberg’s back in this matter.
Facebook’s Libra is built on the Blockchain, which promises secure, fast, and reliable while completely decentralized payments by removing intermediaries such as banks and payment gateways. Unlike other digital currencies such as Bitcoin and Ethereum, Libra has a stable credit to provide more permanency in transfers and transactions and to be more durable. These types of digital currencies are called stable currencies or stable coins. Libra will initially be backed by four valid paper currencies, including USD, Euro, Yen, and Pound sterling.
Though, Libra’s distinctive feature does not lie simply in its being a stable coin. Transparency, democracy, traceability, and the block maker’s anonymity are distinctive features that made Bitcoin an attractive, unique, inclusive, and of course, a profitable industry within Blockchain. Yet, by limiting the possibility of creating and approving the Blocks by the given number of companies in its coalition, the stable Libra implements another type of Blockchain in financial transfers upon which the cornerstone of a controllable digital ecosystem would be established.
Not long ago, J. P. Morgan Investment Bank, the Wall Street financial giant, unveiled its stable currency that Libra is more similar to it, among others. The Blockchain of this type is also called permissioned Blockchain, which is commonly used in the supply chain and esp. to track essential goods and documents. As stated initially, Libra will be made public within five years. Although, as mentioned in Libra’s white paper, the main challenge is that no one can’t be sure that there is a viable solution for a financial transaction system, which is stable, secure, and fast-paced and also operate as a permission-less network (Libra, 2019) .
Such operational inconsistencies and the lack of transparency indicate, at best, one can imagine that Libra, after many years, will become like giant corporations with their core and individual shareholders, and a few selected groups of people will deliberately be able to participate in its regulatory decisions. Put it differently, the slogans such as democracy for all, and the impossibility of any censorship or prohibition, on which Bitcoin and other digital currencies maneuvered, will be forgotten. Worse, ironically the slogan on the home page of the Libra’s site is “Libra for all,” and according to the Libra coalition’s policymaking department: “where ever credit card and Visa card is active, Libra is available” (Seward, 2019). Seemingly, Libra’s everyone means everyone they want or at least anyone who affords to use it; since credit card and Visa card services are not yet available to many people worldwide, these allied corporations in the future may enforce such rules for any user or nationality and block or limit their digital currencies. So, in the most optimistic view, Libra set up to reproduce, if not perpetuate, US-centric domination structures in financial relations, but this time in the form of digital technologies (FinTech). Notwithstanding, intense disputes over the Libra’s announcement in recent months revealed that it could not be regarded simply as a single response of the U.S.U.S. government to reclaim its sovereignty over open-source cryptocurrencies which are threatening USD’s dominance over the global financial system. At the domestic level, Libra’s emergence generated a battle between the traditional regulators and the technological forces of reform; those who rebel against the longstanding order of the things in the most critical way that is: taking the initiative over Dollar. In this sense, Libra is expected to be another version of Dollar with different power relations and stakeholder arrangements. With this in mind, some analysts inclined toward the idea that Zuckerberg has to seek its market for Libra elsewhere out of America because its primary steps would not be allowed in Dollar territory.
Although not being reputed for protecting its users’ privacy and information, Facebook claimed high security in transactions process and reported that users’ financial transactions will not be stored on Facebook, but will be saved on another company of Facebook, called Calibra; so there is no link between Facebook and WhatsApp profiles to their financial transactions, and it’s untraceable. Whereas David Marcus, head of the Libra project, in response to how to prevent money laundering in the system, says: “The Libra network is not the choice of criminals and money launders because the names in this system are aliases and are not anonymous or protected, so their choice will still be currencies such as Bitcoin and Ethereum” (Bloomberg, 2019). How can a system be untraceable and at the same time, prevent money laundering? Doesn’t that implicate the expansion of America’s strict regulation over the digital space?
Besides, another feature of Facebook that, despite all stated problems, reinforces the possibility of pervasion of its cryptocurrency is that all other digital currencies, until now, have lacked user-friendly design principles, and they were difficult to access. As a result of these defects, only certain people in the community used digital currencies, and it’s an unfamiliar and strange concept for most ordinary people. Facebook intends to use its global reputation and pervasive social influence as a golden opportunity, and by leveraging the successful user interface experience in its current products, assures the community that using Libra would be as simple as using WhatsApp or Facebook.
Finally, despite Libra’s monopolistic and authoritarian features, it can be said that the high technical capability of its coalition to speed up transactions and Facebook’s large number of users, makes it possible to globalize Libra. It’s not exaggerating if we consider Libra as a smart response of the American macro decision-making body to maintain political power and stabilize its superior economic position so that Libra will be a new form, this time globally, of U.S. Federal Reserve. It should be noted that besides the current state, dominant digital currencies such as Bitcoin and Ethereum may continue to survive and keep up their features as such, distinguishing them from Libra; but the world financial transfers might be diminished gradually in favor of the U.S. emerging Dollar i.e., Libra.
Bloomberg. (2019, June 18). Facebook’s New Libra Cryptocurrency to Have Over 100 Launch Partners. (J. Weisenthal, Interviewer)
libra. (2019). Section 02 Introducing Libra. Retrieved from White Paper.
Seward, Z. (2019, June 18). Facebook Unveils Libra Cryptocurrency, Targeting 1.7 Billion Unbanked. Retrieved from coindesk.