OPINION: Libra’s Race is On
Cryptocurrency will see a sea-change in adoption if Facebook and a consortium of payment, technology and blockchain companies as well as non-profits and academia roll out their planned Libra stable coin.
Instead of developing the cryptocurrency, evangelize its use, and then hope that an ecosystem develops around it, the cryptocurrency’s governing body, the Libra Association, plans to reverse the process’ order.
The Libra Association expects to have representatives from each of the network’s validator nodes steer the cryptocurrency’s technological development and manage its reserve fund when the Association launches Libra sometime in 2020.
In the meantime, Facebook and its electronic wallet subsidiary Calibra are expected to maintain their project leadership role at least through the end of the year.
Since the Libra Association announced its intentions on June 18, every major central bank has made polite and non-committal comments about the endeavor.
Federal Reserve Chairman Jerome Powell noted that digital currencies are in their infancy and it will be a long time before they replace central bank currencies.
Across the pond, Bank of England Governor Mark Carney promises to keep an “open mind but not an open door,” to the Libra project.
Other central bankers also have made similar polite and non-committal public statements regarding Libra.
In the political world, things are different. French finance minister Bruno Le Maire has called for the creation of a Group of Seven taskforce to ensure cryptocurrencies are governed with anti-money-laundering and consumer-protection regulations a week after the Group of 20 finance ministers agreed that cryptocurrency regulation would require global coordination.
Both chambers of the US Congress also expect to hold hearings on Libra in the coming weeks, which should be fun to watch.
Facebook CEO Mark Zuckerberg’s contempt of dealing with Congressional hearings is legendary regarding Facebook’s approach to online privacy.
Many see Libra as a complete overreach by Facebook, and legislative and regulatory hurdles likely will ensue, but it probably is too late.
Enacting deliberative legislation and financial regulations, not forgetting harmonizing them across borders as well, takes at least a couple of years and the clock is ticking.
Once Libra goes live in the next 12 to 18 months, there is little that regulators and legislators can do to reign in the decentralized currency: The genie will be out of the bottle.
Aim is to support innovation that will benefit consumers.
USC envisages being 100% backed by fiat currency held at the respective central bank.
Novelty, politics, and rapid evolution will preclude meaningful harmonization.
Many of the regulatory issues are common to traditional securities trading venues.
The SEC may get more regulatory bang for its buck by updating its ETF approval process.