Libra (Facebook Coin/Crypto) Currency Special Issue

I have been writing about Libra the new global currency that Facebook has proposed since it launched. As conversations around it move to the next phase it seemed prudent to bring all my posts and articles on it into one special issue and expand on its development.

(Originally at www.adidispatch.org - subscribe for free)

In This Issue:

• Central Banks’ Are Afraid - Competition is Here
• Ease of Doing Business - Remittances & Libra
• Why Governments Should Support Libra?
• Turning Off the Internet to Stop Terrorism
• What can Facebook and Crew Do to Push Libra ahead?
• The New Gig Economy in Libra
• Common Myths About Libra in News Articles

Central Banks' Are Afraid - Competition is Here

A stable coin such as Libra would severely impact poor countries central banks for setting monetary policy: This is a good thing. 

One of the greatest reasons why these counties remain poor is the very incompetence and corruption of the central banks which are often subservient to the political masters' whimsies and their own ideological fallacies. 

The businesses and the consumers in these countries are victims of these central banks and deserve something better. 

A stable coin provides a real benchmark and alternative which will force countries to behave with their fiscal policies and spending and craft taxation and government services that people actually appreciate and buy into.

Already many of these people are trying their best to transact in stable currencies such as the dollar but are being held back due to logistical constraints.

History has shown only great crisis hold central banks to account and that to temporarily. We need a constant accountability system where central banks need to provide real value to their constituents or risk losing their influence and positions.

Every citizen of the world should be able to choose their central bank and if they prefer one run by a 100 plus (and expanding) corporations, non-profits and academic organizations let it be so. 

Better than them begging for a change in monetary policy or begging for food.

Ease of Doing Business - Remittances & Libra

Anyone who has had to make frequent international wire transfers for regular business in a developing economy immediately understands the need and the power of a stable coin such as Libra.

The current process of transfers using the SWIFT settlements and even IBAN is so troublesome and broken that any offering that makes settlements near-instantaneous would achieve dramatic adoption. 

This is especially true for those who waste constant hours on confirming sends and receipts and having to reconcile bank statements to complete this simple step.

There are commonplace tales of wire transfer being accidentally entered wrong, swift transaction going to wrong accounts, and hackers waylaying international transfers.

The sad part is despite being “official and regulated transfers” anecdotal evidence suggests that recourse takes a terribly long time and often can cost thousands upon thousands of dollars to get banks to make businesses whole for mistakes. If your banker has a stagecoach as a logo - it is likely you will never see the money again.

Banks also have a terrible habit of hanging on to your money for a few extra hours or even days for “regulatory compliance” and “inter-bank processing” purposes but more because they want the extra interest-earning at the overnight rate.

When you add the regulatory compliance requirements in countries such as India most small business operators want to throw up their hands and walk away. 

A stable coin such as Libra would allow businesses to rapidly send and confirm payments while incorporating the status updates immediately into their b2b systems and consumer checkout pages. 

If they don’t have to pay unnecessary banking and forex charges that would be an icing on the cake.

It would also let them get out of the clunky banking systems that no amount of technology juicing seems to be able to make reasonably usable for international transfers. 

Why Governments Should Support Libra?

Governments should support Libra coin because it has the the potential to bring great stability and prosperity to the most poor and war torn areas of the world. 

Small entrepreneurs can access global capital markets and sell their services (if not goods) while at the same time ensuring their savings are not threatened by the foolish and corrupt actions of local governments, dictators and warlords.

It would allow individuals in Sudan, Somalia, Venezuela , Iraq, DRC, North Korea, and a host of other troubled countries to have marginal economic stability which would lead to less poverty, radicalisation and terrorism. 

By giving these individuals access and a stake in the global economy a true mainstream stable coin promises to get them out of the shadow and into a more transparent world. 

It would also immensely benefit those who are regularly shunted around by war and strife as they can carry their life’s savings with them and immediately contribute to their new host city’s economy. 

It would be myopic for governments to ignore these immense worldwide benefits out of their own fears and insecurities. 

Turning Off the Internet to Stop Terrorism

A bestselling mainstream thriller author a decade ago wrote an international spy novel that ended with the heroes “turning off” the internet in order to prevent terrorism in the long run.

An otherwise great book ended with one of the most face palming scenarios clearly showing the author had absolutely no clue on how the internet powers the global economy. The author just about escaped from becoming a global laughing stock.

The opposition against Libra seems to follow a similar refrain…..but, but…terrorism…but..but..money laundering! Never mind that it is configured as a pubic ledger and access to it would be through institutional cash transfers, or that being able to track monetary flows is any intelligence analysts greatest weapon. Libra washers will come up but as a regulated currency it is far more likely to be tracked than dark money flowing through dark networks.

A few decades ago the internet could have been easily killed off at its inception with these arguments. “You mean a decentralized network with no single control that can be used for encrypted communication between terrorists at extremely low cost or free?”

Stopping a global stable coin such as Libra using these concerns is extremely myopic.

Safeguards and systems need to be put in place and the whitepaper does not sufficiently cover fraud management and hacking as built-in features deferring those into a future contract based language yet to be fully described out.

But to go against the very concept in disingenuous and reeks of people using the terrorism and money laundering club to pursue their own agendas.

As a logical extreme aside an inventive Asian or EU politician might attempt to ban all USD dollar transactions cash or digital outside the U.S. as possible money laundering and terrorism prevention. After all, isn’t the USD the preferred currency of terrorists and money launderers around the world?

In 2019 have we not learnt our lessons on all of this?

What can Facebook and Crew Do to Push Libra ahead?

The best thing for Libra currency at the moment is for Facebook to quickly fill in the remaining slots for the 100 with well known and trusted institutions and start to push Libra out towards them.

Despite creating a reasonable governance framework Facebook seems unable to extract itself from the Libra project as not only its principal architect but as its perceived (incorrectly) overlord.

Part of this is journalists, commentators and politicians jumping in without fully understanding the whitepapers presented, and another part is the smart people in the room realising that if they need to kill Libra for their own agenda now is the time to do it before it is sent into the wild.

Facebook should (but won’t) find an alternative country sponsor (Singapore?) who would allow them to base the Libra foundation there and transfer the technical team and IP as soon as possible.

It needs to further see if among the 100 it can bring in a few more forward-looking country partners (Estonia? Malta? Dubai (UAE)?) to give the sovereign touch and a tacit acceptability of the currency in those locations.

It should then focus on working with regulators on the wallet aspect having forcefully removed itself from the Libra system. The announcement of Libra has been a bold step. Keeping it alive will require equally bold steps.

The New Gig Economy in Libra

One of the biggest impacts that Libra will have is on the gig economy world. Right now freelancers and consultants around the world are struggling with their local currencies, taxation systems, and most importantly - getting paid.

This is especially true in countries where there are poor institutions, terrible banking systems, and unstable currencies and politics.

Internationally it is becoming harder for small businesses to open internationally working bank accounts, process credit card payments, and in general participate in the global gig economy.

While freelancers struggle to get paid, small and medium businesses who desperately need access to an international eco-system struggle to pay them.

This is even true for larger economies such as India which make it exceptionally difficult to transact on global freelancer market places.

In other countries, fluctuating foreign exchange rates make it hard to match income to expenditures.

Libra has the opportunity to become the flag-ship currency for the international gig and freelancer eco-system rapidly opening up opportunities for freelancers and customers around the world.

As the rise of the worldwide service economy continues the new hourly benchmark for work would move away from the USD and EUR and overtime benchmark at the Libra rate.

With freelancers being paid in Libra overtime companies would start to keep active Libra balances instead of converting back to home currencies on sales further perpetuating the use and acceptance.

The great opportunity beyond convenience is to allow a more globalized service economy that would provide economic freedom and flexibility to individuals without impinging on the immigration debate.

As telepresence and telemetrics expand with faster and faster networks stepping in it is not hard to imagine even non-tech service jobs finding a global talent pool. (Will cover this is another special issue.)

Common Myths About Libra in News Articles

Common Myths that seem to plague even well-known journalist outlets:

Facebook will continue to assert majority control of Libra after it’s launched.

No it will devolve it to 100 institutional partners who will further devolve it to a decentralize system after around five years.

The group of “100” who are the initial governance association of Libra will have perpetual control of the currency.

The stated governance model clearly envisions and provides for a decentralized system over a period of time once stability is achieved and the coin is working properly. It is estimated around five years after the launch of the coin this decentralisation would take place.

Governments will be not be able to assert control on how the currency interacts with their economy.

This is a choice made by each government. If they choose to properly recognize and regulate the currency as another foreign currency they can easily adapt their current systems without much problems. Libra accounts can be given “bank account” status that must be declared for tax purposes.

Organizations will be unable to use Libra in their audited books of accounts.

Multi-national companies have figured out multi-currency reporting down to an art. As long as they are able to present the Libra accounts for audit and there is a public exchange rate - auditors will have no technical problems. If the host country recognizes Libra as a currency it can be treated as such, if not, it might end up as an asset of sorts subject to tax.

Facebook’s wallet and Libra are inseparable

Facebook’s wallet Calibra will be the flag bearer but only one option in which to hold Libra coins. While the success of both are intertwined they are not inseparable. In a worst-case scenario, Facebook can abandon Calibra (which it won’t) and Libra would still exist and thrive albeit with a slower adoption.

Facebook and others need banking licenses for Libra accounts

A company creating Libra accounts or wallets would only need a bank charter or license if that country recognizes Libra as a valid international country.

A bank charter requirement for Libra would be a boon to Libra as it would cause the U.S. government to recognize Libra as a valid international currency with the full regulatory might and rules that come with it.