Facebook's Libra: The Good, the Bad, and the Ugly!

Crypto made it to the White House: Recently, President Trump tweeted about Libra and Bitcoin for the first time (spoiler: he doesn’t like both!). A couple of days later Treasury Secretary Steven Mnuchin held a press conference on virtual currencies. Mnuchin reiterated talking points shared by his boss, including Bitcoin is highly volatile and based on thin air and Bitcoin is not money. Meanwhile David Marcus, Facebook’s Head of Libra/Calibra, had to answer questions from the Senate Banking Committee for more than two hours. The hearing was titled Examining Facebook’s Proposed Digital Currency and Data Privacy Considerations.

Here’s our take on Facebook’s Libra project.

The Good:

  • With the potential to reach Facebook’s 2.3bn customers, Libra could become the largest and most successful cryptocurrency project, bringing banking to the unbanked and giving hundreds of millions of people in emerging countries with high-inflationary state currencies access to (private) stable digital money.

 

  • The announcement of Libra has initiated a global conversation about the origins and nature of money, the role of state-controlled central banks and the potential impact of corporate cryptocurrencies and non-corporate cryptocurrencies like Bitcoin and Ether. Think of it as a huge awareness campaign for crypto and blockchain!

 

The Bad:

  • Given past events, the words "Facebook" and "Data Privacy" somehow don't really fit together. Calibra’s privacy policy (Calibra is the wallet software for Libra) states that Calibra customer data [is shared] with managed vendors and service providers — including Facebook, Inc. Whereas on Libra’s website Facebook says that financial data will not be shared without customer consent. (ok, but if you want to you use Libra you have to consent anyway?!). The details regarding data privacy remain unclear.

 

  •  Although Facebook uses words like “decentralized” and “blockchain” to describe the Libra project in the whitepaper, Libra will launch as a permissioned enterprise “blockchain” fully-controlled by the Libra Association (which is a relatively-closed circle of Facebook and other big corporates). And some purists in the blockchain community even argue that the technology Libra is based on isn’t even a “blockchain” but a single versioned database that uses “blocks” just for optimized transaction processing.

 

The Ugly:

  • On the one hand Libra could be the long-awaited killer app for the mass adoption of crypto and blockchain technology. On the other hand, Facebook’s ambitious move has rung the alarm signals for central banks, regulators and politicians to start actively opposing any new technology which threatens the monetary monopoly of nation states. This could lead to a ban of all cryptocurrencies including Bitcoin.

 

  • If Libra is successful on a large scale it would jeopardize stablecoin projects like Tether or USDC and also mean the end for many blockchain startups addressing the payment and remittance space. The only survivors could be proven use cases like store of value (Bitcoin) or crowdfunding/smart contract platform (Ethereum).  


Ironically - thanks to Libra -  Facebook, a dominant player of the centralized web could also become the dominant player of the decentralized era.