Well, I sure feel silly.
I confess – I was thinking like a conspiracy theorist when I learned the final details around Libra, the upcoming cryptocurrency led by Facebook and backed by dozens of others.
Libra’s entire model is so dependent on the US Dollar, that together with their plans to be used world wide – I thought “Surely this was planned WITH the US Government” or at least while consulting with them.
But I couldn’t have been more wrong, as we learned this week that isn’t the case, when US Treasury Secretary Steve Mnuchin instead came out and expressed huge concern over the whole thing.
The fact is, and i’ll explain why – this could only strengthen the USD if it succeeds, and have no effect on it if fails. Hardly cause for huge concern.
So is the word ‘cryptocurrency’ really just so confusing, that it can create reactions like this?
Let’s compare these fears, with the simple truth.
If you’re catching up, here’s the basics:
Libra is a ‘stable coin’ so it will always be worth exactly $1, every 1 Libra = $1 USD. So unlike Bitcoin, Ethereum and others – this won’t be a coin you find people investing in for profit. It’s only use is transnational.
They will then hold USD reserves to back up each Libra coin in circulation.
Now let’s look at the two categories the Treasury Department’s concerns fall under.
1) Integrity of the US Dollar…
A Libra token represents literally nothing more than a US Dollar, no different from one in your bank.
This is the main reason i’m stunned by Secretary Mnuchin’s reaction.
One huge reason for the strength of the US Dollar, is that it is the global standard currency for buying oil. There’s a reason the US uses every trick in the book, and writes a few of their own to keep it this way.
On that note, the USD has likely already gotten a boost from being the dominate crypto-to-fiat pairing.
Now imagine if Libra is successfully adopted around the world. USD is suddenly involved in a lot of transactions it wouldn’t have been before.
For example, perhaps some retailers here in the UK begin accepting Libra. At the same time, it begins to catch on with the public.
Like me, while in your home country you probably use your nation’s currency. So here, 99% of my transactions are done using the Pound (£) along with those in Wales, Scotland and Northern Ireland.
Now throw a USD backed coin like Libra into the mix.
Suddenly transactions that would have never involved the US Dollar, are completely dependent on it. Every purchase I make here, Libra will need to hold an equal amount in USD there.
2) Illegal Usage…
The other concerns expressed are the usual “Libra could be misused by money launderers and terrorist financiers” babble we’ve all heard before, typically about Bitcoin.
There is no honest way to disagree with the following point: Cryptocurrencies are infinitely more traceable than fiat currency.
Another plus: funds can be tracked outside of US borders even when they enter a hostile nation. This is thanks to a public ledger, there is no cooperation needed.
But paper cash is completely untraceable.
Even digitally – you can buy a pre-paid Visa or Mastercard with paper cash, giving someone totally anonymous electronic transfers.
This means the truth is, cryptocurrencies do not offer a single, real advantage for criminals that they cannot find elsewhere.
In closing….
While I can’t say i’m thrilled Facebook is making it’s entry into the sector, I can say between them, and the other companies involved in Libra, they have the lobbying power to basically force members of the US Government to get educated on the topic.
Because hearing leaders standing in front of microphones, saying things so inaccurate they should be embarrassed to say them, is getting old.
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Author: Mark Pippen
London News Desk
