The launch of a new cryptocurrency by Calibra, a regulated subsidiary of Facebook, reminds me of the quote, “Go for it now. The future is promised to no one”, rightly said by Wayner Dyer. Well, having quoted that, Facebook also had a grey past when people voiced their concern on privacy and security and Mark Zuckerberg had to testify before the US Congress on Facebook’s usage of data. Nonetheless, Facebook has been able to keep people hooked who spend most of the time on social media.
Mark Zuckerberg on 18th June 2019 announced the launch of a new cryptocurrency, Libra, with a mission to enable a simple global currency and financial infrastructure that empowers billions of people which would be formally available in the first half of 2020.
The Fuel Behind
The rise of the internet and mobile is not alien to any parts of the world today and the people are witness to the developments that have taken place in the last decade. The knowledge and information across the globe are easily available at our own convenience with the reach of the internet. Despite the massive progress, a large chunk of the population is still outside the financial system with no or limited access to banks and one of the major reasons has been insufficient funds, unpredictable fees/charges to maintain a bank account, the distance of bank from home, and lack of trust.
The game of Intention and Justification
Libra intends to solve the crisis that the people are facing across the globe. Mark believes that blockchains and cryptocurrencies have unique properties to address the problem of accessibility and trustworthiness and this can solve the issue with lower-cost and a more connected global financial system. Libra may move the concentration from ‘Internet of Things’ towards ‘Internet of Money’. Libra promises to create a more inclusive financial system which will have three parts:
a) It is built on a secure, scalable, and reliable blockchain;
b) It is backed by a reserve of assets designed to give intrinsic value;
c) It is governed by the independent Libra association tasked with evolving the ecosystem.
Libra is a unique cryptocurrency compared to others as it is fully backed by a reserve of real assets which will consist of bank deposits and short term government securities.
Mark Zuckerberg had well understood the complexities of launching a cryptocurrency and has tried to clear the air beforehand by ensuring that Libra is regulated by Calibra and not Facebook so as to separate the social and financial data.
Trading or Problem-Solving
Anyone who is aware and traded Bitcoin (a cryptocurrency) would know the volatility it showed in a span of two years especially in India while the environment was gloomy with no certainties from the Reserve Bank of India (RBI). However, once the legality of cryptocurrency was clarified by the RBI, the speculations ended and a lot of people who put their money in Bitcoin through Zebpay or other similar platforms had to part ways with their money. The volatility was not only restricted to India, and people from various countries lost their money in the dream of creating wealth. Considering the situation people had faced, Libra is supposed to be a stable and less volatile digital cryptocurrency which shall be backed by real assets ensuring a high degree of assurance that they can convert digital currency into local fiat money based on an exchange rate.
Swaying with the Names
With the mission that Libra destines to attain, the Libra Blockchain and Libra Reserve shall have a governing entity which shall comprise of diverse and independent members. The entity shall be an independent, not-for-profit membership organization with its headquarters in Geneva, Switzerland. The Founding Members would hail from different industries and include the Big Names like:
- Payment: Mastercard, PayPal, PayU (Naspers’ fintech arm), Stripe, Visa
- Technology and marketplaces: Booking Holdings, eBay, Facebook/Calibra, Farfetch, Lyft, MercadoPago, Spotify AB, Uber Technologies, Inc
- Telecommunications: Iliad, Vodafone Group
- Blockchain: Anchorage, Bison Trails, Coinbase, Inc., Xapo Holdings Limited
- Venture Capital: Andreessen Horowitz, Breakthrough Initiatives, Ribbit Capital, Thrive Capital, Union Square Ventures
- Nonprofit and multilateral organizations, and academic institutions: Creative Destruction Lab, Kiva, Mercy Corps, Women’s World Banking
The legality of cryptocurrency has been a long-standing point of debate across various nations and the determination of legality or illegality largely depends on the location and the activity of the user.
Countries like Algeria, Egypt, Bolivia, Ecuador, Saudi Arabia, Iran, Nepal, India have banned the use of cryptocurrencies. On the other hand, countries like USA, Malta, Belgium, France, Greece does not term cryptocurrency as illegal, however, different countries follow different approaches in regulating cryptocurrencies. However, talking from the Indian perspective, cryptocurrencies are not legal in India however, it has been categorically stated by the Finance Ministry that the government shall decide on using the blockchain technology for the development of a financial system in our country.
Is Face-Value the only Value
It’s no lie that Facebook has emerged as one of the mightiest company having impacted several industries and psychology and with a new cryptocurrency being launched by Facebook, I have a different perspective on the entire scenario that is going to pan out.
1) Facebook had a debatable record on privacy and security thus intimidating the users across the globe and in my opinion, Libra can add on to the pain of consumers. Although Zuckerberg claims Libra to be safe and secure as the operations shall be decentralized and information shared with Calibra shall be kept separate from Facebook and there shall be a wall between Facebook and Calibra, but, Calibra shall serve as the virtual wallet that can be used through Whatsapp and Facebook Messenger and this method puts the entire claim to be questioned. Further, as pointed out by Business Insider, Calibra’s terms of service indicate that there are instances in which Calibra account data could be shared with Facebook for crime prevention and in other “limited circumstances.” The ordeal does not end here; Facebook could, with user permission, share information with Calibra for an “improved” experience.
2) With no control of the Central Government, Libra can be used independently and this could give rise to crimes like money laundering, smuggling, drug peddling, etc. as the movement cannot be tracked and people shall be at free to transact it their own way.
3) Libra might be able to solve a lot of problems but at the same time this might lead to the government losing control over the economy and we could see a parallel economy running in place. This, in turn, can also cause difficulty in the pricing mechanism.
4) The idea of Libra to consumers might seem to be an icing on the cake considering the behavioral pattern of banks and its other shortcomings but at the same time it should also be considered what would happen to the interest that is being earned on savings with no banks in place or how would you deal with the mortgage payments.
Putting all the benefits, critics and speculations aside, we all have to wait till 2020 when Libra is launched and by that time we can expect to see some major developments and amendments in laws relating to cryptocurrencies across the world and rest to watch if Libra turns out to be a good samaritan.