Libra is also not a “stablecoin,” the portmanteau used to cover things like Tether. If nothing else, Tether showed the dangers of one firm just deciding how things work, without any regulatory oversight or transparency.
Tether promised to have its cryptocoin backed by dollars held in reserve, but, well, not so much. I gather Tether is still a going concern, but I lost track of the countless court proceedings that have resulted from that flawed claim.
It’s also not a debt instrument—there’s no “promise to pay” here. There’s a “promise to exchange” from a held basket. The rights of unit holders and the mechanisms for dispute resolution and so on are all still very vague, but ultimately, it’s inconceivable to me these don’t end up being … you guessed it … just a fund. An everyday, plain old fund.
The closest example to something like this has been the success of M-Pesa, a global payment system originally started in Kenya that has spread geographically throughout the region. Unlike Libra, however, M-Pesa is actually, really, just a mobile banking system, which has special licenses from regulators to act as a banking system. In other words, the need for a digital transaction solution forced the regulators to make room for the future, which sounds, well, promising.
Predictions? We Got ’Em
This may make Libra seems like a far-fetched, not-gonna-happen idea, but I don’t think so. I really think it’s just a matter of timing, not feasibility.
There’s nothing technically all that tricky about what Libra is proposing. Essentially all of the hurdles are either adoption related (which, having already grabbed Facebook and Visa as backers, seems pretty well in hand) or regulatory in nature.
It’s certainly possible that U.S. regulators just pooh-pooh the whole thing; in which case, Libra can simply restrict access by geography and say, “Sorry, this ain’t a U.S. thing; never mind.” That would be super unfortunate, ceding more ground to international players (which is already happening; you can use Alipay at Walgreens!).
To me, it’s far more likely this is the beginning of a much-needed and really interesting conversation about the role of money in the modern world. That’s the right discussion to be having in Washington, and Libra is a big enough initiative to put it on the agenda.
For that reason, as much as I’m wary of Facebook, in this case, I for one welcome our new crypto overlords.
Contact Dave Nadig at [email protected]