Student Blog: Facebook’s newest project – Libra
by Inri Panajoti, RBFL Student Editor
Facebook recently announced its new currency, termed Libra. Libra’s mission is to “enable a simple global currency and financial infrastructure that empowers billions of people.” Globally, about 1.7 billion adults do not have access to traditional banking and international money transfer fees average around seven percent of the amount transferred. Libra’s goal is to give the underbanked, along with everyone else, access to a new currency and a more efficient and connected financial system. Libra will run on the blockchain, a type of technology used by many cryptocurrencies. Libra is composed of three major parts: (1) the blockchain used to run the cryptocurrency; (2) a reserve of assets designed to back up the currency known as the Libra Reserve; and (3) an independent association tasked with governing the project known as the Libra Association (“Association”). Libra is not like other cryptocurrencies. Besides using blockchain and cryptography, Libra is dedicated to setting itself apart. The Libra Reserve backs up the currency, giving it stability and intrinsic value. Additionally, many cryptocurrencies value decentralized governance, while Libra has a more centralized form of governance through the Association. The Association can be a great solution to help comply with regulations. It gives Libra more decentralized control than traditional financial systems, but it does not leave control completely to the public. The Association will oversee all decisions, regulations, and matters relating to Libra, and will have all of the original validator nodes of the network. Meaning that the Association will be the only ones that can approve transactions, create, or destroy Libra. While Facebook came up with the idea for Libra, it will not be directly involved. Instead, it has set up an independent subsidiary, Calibra, to be part of the Association. The Association is designed to have around 100 by Libra’s anticipated launch in the first half of 2020, with each member having an equal one percent of the voting power. At its peak, the Libra Association had twenty-eight members. However, it had some trouble last week as several big names dropped out, including, PayPal, eBay, Visa, Mastercard, Stripe, and Mercado Pago, leaving 21 members. The Libra Association said earlier in the week that more than 1,500 entities have expressed interest in joining the project, with 180 meeting the organization’s membership criteria. A lot of the members that left are concerned about lawmaker’s harsh response to Libra and potential problems with money-laundering, data privacy, and privatizing the international money supply. While these are all valid concerns, it is disappointing to see lawmaker’s harsh response to a project that could revolutionize the current financial system. Technology has made major improvements in numerous industries throughout the past thirty years. It’s time to let technology make financial systems more efficient. While Libra, and other cryptocurrencies may have their problems, lawmakers should be more open to discussing new and innovative ways to modernize financial systems to improve efficiency and reduce costs.
References:
Libra Ass’n Members, An Introduction to Libra 3 (Libra Ass’n Members eds., 2019). Libra whitepaper <https://libra.org/en-US/white-paper/#introducing-libra>
Usman W. Chohan, Cryptocurrencies: A Brief Thematic Review, 1 (2017)
Satoshi Nakamoto, Bitcoin: A Peer-to-Peer Electronic Cash System1(2008)
Jon Hill & Philip Rosenstein, Libra Sparks Bipartisan Angst, but What can Regulators Do, Law 360 (July 12, 2019), https://www-law360-com.ezproxy.bu.edu/articles/1177883/libra-sparks-bipartisan-angst-but-what-can-regulators-do-
Christian Catalini et al., The Libra Reserve 1 (Christian Catalini et al. eds., 2019)
Richard Partington, How the Wheels Came off Facebook’s Libra Project, Guardian(Oct. 18, 2019), https://www.theguardian.com/technology/2019/oct/18/how-the-wheels-came-off-facebook-libra-project
Nikhilesh De, Facebook-Led Libra Forms Governing Council After Big-Name Departures, Coindesk, (Oct. 14, 2019), https://www.coindesk.com/facebook-led-libra-forms-governing-council-after-big-name-departures
Jessica Bursztynsky, Libra’s Co-Creator at Facebook Touts Progress After an Exodus of Key Backs of the Crypto Coin, CNBC, (Oct. 16, 2019), https://www.cnbc.com/2019/10/16/libras-co-creator-touts-progress-after-exodus-of-the-crypto-backers.html