The world of cryptocurrencies just took another strange step, with the announcement that 2020 will see Facebook launch Libra, a ‘digital currency’. Libra will operate via blockchain technology. Facebook is reckoned to have 2.38 billion monthly active users, although statistics are a fast and loose business when it comes to social media and the internet.
Facebook’s mission, it says, is “to give people the power to build community and bring the world closer together.” That’s news to me. I always thought it was the more noble cause of making money. Why else would it have snapped up WhatsApp, Messenger, Instagram and other social media platforms but to build ramparts against assaults on the Facebook Empire? But let’s leave that aside for now.
Libra will be managed by its 28 founder organisations (including Facebook) who have agreed to form the Libra Association, the Geneva-headquartered organisation that will operate the cryptocurrency, with each investing a minimum of $10 million into the project.
A digital ‘wallet’ app called Calibra will allow people to buy and sell Libra. The Libra Association hopes that people will borrow Libras, buy goods with Libras, and pay bills using Libra. Facebook insists that it will not use any financial data for advertising purposes, and that the currency will be independent from the company.
Given the mess that Facebook got into recently over the collection and use of personal data, one might be suspicious of the promise that this venture is not a data collection exercise.
So why is Facebook creating Libra? It says it wants to give those “1.7 billion adults globally” who “remain outside of the financial system with no access to a traditional bank” the chance to access financial services and cheap capital. We can all say “Amen” to that.
But there are some serious questions that need to be posed about Libra.
For one thing Libra will be tied to reserve central bank assets which largely will mean paper currencies. The reserve of currencies will be invested in low-risk assets such as government bonds. More paper.
Then there is the issue of regulation. As yet the US Securities and Exchange Commission has not ruled on how it regards Libra but Charlie Delingpole, CEO of Comply Advantage, an anti-money laundering consultancy, has said that the “Facebook coin will do for money laundering what Facebook did for fake news — likely lead to an explosion in terrorist financing.”
Libra is not a challenge to Glint. Unlike Glint, which is entirely allocated-gold backed and regulated by the UK’s Financial Conduct Authority, Libra is backed by paper. Libra users will not own their Libras – the central banks backing the Libras will. Facebook is a globally known brand and has the power that goes with that. Its currency may succeed in persuading social media fans to flock to it. But wiser heads will turn to Glint as a way of both defending their wealth and also as a convenient way of buying anything. Download the Glint app now and find out more.