Facebook’s Libra project had promised to spark a global financial revolution that would bring unprecedented inclusivity and borderless banking. Within months, Mark Zuckerberg’s stablecoin dream was in tatters. But the death of Libra may turn out to be a positive thing for the crypto landscape.
The notion of Libra was that it would exist as a digital currency that can be seamlessly transferred through Facebook’s Messenger and WhatsApp messaging platforms - offering access to banking services in areas where it’s impossible to use traditional banking systems.
The coin would be a cryptocurrency pegged to real-world assets to retain a consistent value, and the companies that Libra claimed to be involved in the project spanned a wealth of industry leaders around the world like Mastercard, Visa, PayPal, eBay, Uber and Coinbase.
Libra’s grand unveiling took place in June 2019, but by October of the same year, the project was already on the ropes. Three major players who were already confirmed by Libra as committed to the project, Mastercard, Visa and Stripe, were considering their positions. The 27 Libra Association members began to dwindle and Facebook decided to alter its plans and instead focus more on the development of digital wallets.
The Libra revolution had the potential to change global finance forever and catapult cryptocurrencies into the mainstream. However, its failure to launch may be a blessing in disguise for the crypto landscape.
The Value in Keeping Crypto Decentralized
'what does it profit a man if he gain the whole world and lose--how does the quotation run?-- his own soul'? runs a pertinent line from The Picture of Dorian Gray.
The quote has biblical origins, but it could easily translate to the easy passage into the mainstream that Facebook offered the world of crypto in June 2019.
(Image: Markets Insider)
The chart above illustrates just how effective Libra’s announcement was in catapulting the value of cryptocurrencies like Bitcoin upwards at the time. But even amidst the excitement of a major corporate player getting involved in crypto, there were clear fears over what it would mean for the decentralized soul of digital finance.
Facebook isn’t known for operating in an ethical manner, explains Anne Connelly in Medium. Questions about the passing on of personal data to Cambridge Analytica - a company at the forefront of election irregularities in both the US and UK - were raised of Facebook. Further afield in Africa, Facebook has also been accused of facilitating election manipulation, and has even found itself implicated in the genocide of Rohingyas in Myanmar, Connelly writes.
With this in mind, it’s difficult to see how Facebook plans to respect the decentralized soul of cryptocurrencies. The beauty of crypto is that it operates in a universe that isn’t bound by political and corporate influence.
Libra may have been unveiled as a significant opportunity to bring banking to Sub-Saharan Africa and other regions without access to financial services, but Facebook’s motivation for the move is likely to be influenced more by Barclays predicting that the social media behemoths would have made an extra $19 billion from the currency.
Historically, Facebook has opted not to compensate any users for the profits they’ve made from their personal data, unlike some platforms. Connelly expresses her fear that Facebook is “creating a honeypot for government surveillance,” a claim that flies in the face for everything that makes cryptocurrencies a breath of fresh air.
When announcing Libra, Facebook claimed that the currency would be decentralized and built on blockchain. However, the only reason that there’s a claim for decentralization is solely because Libra is based on blockchain.
Blockchains help to bring a greater level of privacy to digital finance, because records of transactions are kept by multiple users, rather than one - which makes it extremely difficult to tamper with the data, ensuring more transparency and security.
Here, it’s worth noting that Facebook hadn’t planned to operate Libra, but the cryptocurrency would be centralized by a central governance body: The Libra Association. The body was designed to prevent the emergence of some form of single oligarchy to rule over Libra.
Although The Libra Association may help some crypto enthusiasts rest easy knowing that Mark Zuckerberg himself would be unlikely to tap into their wallets, it still represents a form of central governance that flies in the face of the truly decentralized coins that have a genuine capacity to help bring secure banking to the world.
Furthermore, just because an association exists, it doesn’t mean that it’s incapable of becoming an oligarchy to rule over the Libra stablecoin. With a range of functional cryptocurrency exchanges out there, some offering non-KYC privacy and others championing transparency, to store wealth in the wallets of The Libra Association seems careless.
Libra Paving The Way For Responsible Progress
Fundamentally, Facebook’s announcement of Libra provided the world of crypto with a glimpse into an idealistic future, where coins can bring banking to deprived areas of the world, with standardised borderless payments and a much more adaptable means of utilizing money.
Now that the glamorous Libra Project that was announced in 2019 looks dead in its initial form, that idealised glance into what the future could look like is still there, and there’s plenty of opportunity for another stablecoin to grow into the market in a more organic manner.
There’s little doubting that cryptocurrencies will shape the future of finance. To ensure its sustainability, the coins that drive innovation tomorrow need to demonstrate trust, privacy and must champion true decentralization.