currency affairs
Why is Facebook launching a cryptocurrency?
EvEr sincE Bitcoin captured the public’s interest with its mysterious origin story and wildly fluctuating exchange rate, blockchain–based money — cryptocurrency — has been big news. In a world where nothing attracts capital like the combination of tech jargon and free publicity, that means crypto is metaphorically a license to print money, as well as literally a way to avoid needing a license to print money.
In June, Facebook announced its own crypto, Libra, operated by a subsidiary, Calibra, and governed by the Libra Association, which includes payment partners like Visa and PayPal, and potential users including Uber, Vodafone and Spotify. It promises the best of both worlds: independence from banks, but with stability and protection. For Facebook, entering the payments market could be a huge opportunity to build commerce on its platform, and reap the profits itself.
One problem with crypto claiming to democratize money is that anything dependent on tech infrastructure is dependent on tech infrastructure giants. A crypto led by Facebook does little to assuage that. Nor does it emulate the permission less ness of Bit coin: although transfers between users’ Calibra wallets will be done peer– to–peer via public key, Libra’s blockchain will be managed only by trusted partners. You can’t mine your own. That does eliminate a significant objection to Bitcoin: the vast use of energy–hungry computing power it encourages.
US economist Joseph Stiglitz suggested the only way Facebook could make money out of Libra would be by abusing monopoly power. Katharina Pistor, a Columbia Law School professor, argued that considering the likely scale, Facebook’s promise to protect the value of deposits posed “massive risks” to global financial markets, concluding that “governments must step in and stop Libra before it launches”. The Reserve Bank of India obliged, prompting Facebook to confirm it had no plans for the country, which hosts its largest user base. Things can only get better.