Caitlin Long, the co-founder of the Wyoming Blockchain Coalition, thinks that Facebook’s Libra cryptocurrency could end up being a threat to local currencies and that could lead to the banning of Facebook and its messaging apps WhatsApp, Messenger and its Instagram photo-sharing platform.
She may well be ahead of the curve on this, with reports today out of India indicating that the authorities there are minded to ban the Payment system use in the country.
Facebook states the new digital currency is an “international currency and financial facilities.” In other words, it is a digital asset built by Facebook and powered by a new Facebook-created variation of blockchain, the encrypted technology used by bitcoin and other cryptocurrencies.
Why is Facebook launching a cryptocurrency, and are they permitted? Facebook declares it wishes to reach the 1.7 billion people around the world who do not have access to a checking account.
The company is most likely to face regulative obstacles and antitrust concerns, especially at a time when lots of regulators want to separate Facebook. However, no appropriate legislation has been presented ahead of the launch.
Bitcoin to benefit from Libra
First, speaking more generally about the Facebook crypto initiative she said: “There are definitely pros and cons, but not completely rejecting… It’s a double edged sword. There are going to be benefits to bitcoin… getting peopled used to the idea of digitally scarce money although Facebook’s coin is not going to be scare.”
“It’s like the intranet before internet – a detour that’s helpful to gaining adoption. I’m a bitcoin maximalists but it will take a couple of decades to get there.”
Speaking on Peter McCormack’s podcast show WhatBitcoinDid, crypto evangelist Long pondered on the likely possibility – assuming that Libra surmounts regulatory hurdles and actually launches – of its widespread use leading to devaluation pressure building up on local currencies.
According to the Association whitepaper the Reserve’s collateral will include in large part a matched value of the local currency.
It had been previously reported that the Facebook stablecoin would be backed by the world’s major currencies as opposed to those of developing.
(PayPal is a Libra Association member. You can buy crypto with PayPal here.)
libra-coin might start a run on local currencies
Long’s suspicion that developing countries’ central banks might be “nervous” about the prospect of the Libra operating in their jurisdiction is bang on the money.
“This is going to take power away from them… it’s powerful in the sense that it does create competition for those local currencies,” she explained.
It’s those fears that are likely behind a report in India’s The Economic Times quoting a local official who said The new digital currency would be banned in the country.
In part it read: “Libra, the cryptocurrency to be unveiled by Facebook next year, will not be available in India, according to a person directly in the know, as current regulations do not permit use of the banking network for blockchain currency transactions.”
Long also said she thought the central banks of the advanced economies didn’t seem to be as worried about the Libra impact, although statements from both the Bank of England governor Mark Carney and Jerome Powell of the US Federal Reserve yesterday while supportive of the utility Libra entails, expressed their firm insistence on stringent oversight.
Facebook’s Libra is playing catch-up with WeChat
She sees Facebook’s motivation behind launching libra-coin as the need to catch up with WeChat in China, where the payments features built into the app is highly popular (as is AliPay).
“Facebook is not usable in China which is why WeChat ended up developing the way that it did. And Facebook obviously gets to see the use that WeChat gets in China is ubiquitous… and that’s clearly what Facebook is going after here. but I’m sure they’re very aware that in certain countries the dictators are likely to ban Facebook if it becomes too powerful.”
All Facebook apps be banned – starting in India
She concludes that countries in which the financial authorities felt threatened by libra-coin could simply ban Facebook’s apps, including of course the Calibra wallet app.
With Facebook not available in China, the company is focusing strongly on India.
Bloomberg reported late last year that the social network giant planned to roll out its crypto-based payments in India first, via WhatsApp platform.
Zuck and the gang will be listening intently to every word that comes out of the Reserve Bank of India very carefully as the projects. The success, in part at least, depends on penetration among the hundreds of millions of unbanked people in India, and elsewhere in the Global South.
And India isn’t the only place there has been pushback against Libra, with regulators and politicians in the European Union, the US and Russia all weighing in in recent days.
Caitlin Long is respected in the crypto industry as someone who spent 20 years on Wall Street, where she worked for investment bank heavyweights Morgan Stanley, Credit Suisse, Salomon Brother, among other financial heavyweights.
The bitcoin price has firmed in the run into the Facebook announcement. You can buy bitcoin here.