Facebook's Libra to Replace the Dollar, Globally?
Updated: Dec 3, 2019
Looking back over the six-hour barbeque of Zuckerburger on Capitol Hill, not much was accomplished with Libra, which was the reason for his visit. Mark Zuckerberg appeared on Capitol Hill to address a published white paper outlying the construct of Libra (a new global digital blockchain cryptocurrency). Facebook also discussed the Libra Association (not for profit governing body), and Calibra (Facebook’s digital wallet). Maxine Waters, the committee chair, was still unconvinced that Facebook is fit for the position of trusting with the keys to the basement floor of the financial system.
Facebook addressed how Libra will aid in financial inclusion for the non-banked and creating better access to remit payment across borders. Zuckerberg proclaimed that sending money internationally should be as cheap, quick, and secure as sending a message through WhatsApp. Congress was more focused on providing criminals and drug dealers with more efficient means of evading taxes and law enforcement. Congress also commented that non-banked Americans do not suffer from access to banks; however, the lack of capital to hold in a bank. The frustration on Zuckerberg’s face was shared for those who understand the world economy is larger than the US constituency. The mission of Libra is “to enable a simple global currency and financial infrastructure that empowers billions of people.”
A strong point that lawmakers presented was how to comply with United States regulation that may have different rules in other countries, who’s law prevails, and under what jurisdiction? Zuckerberg indicated that these are the questions he was on Capitol Hill to help figure out with Congress. Mark reiterated multiple times that Facebook would not endorse Libra without the consent of US regulators. His goal is to build a legitimate digital currency that will solve global banking concerns. Other companies such as Bitcoin, Ripple, and JP Morgan Chase have created their digital coin to compete in the space without government consent.
Mark also suffered much criticism by Congress to host Libra in Switzerland instead of the United States. There was no direct answer, although it was the moment in the testimony when Congress realized the venerability of the United States as a haven for financial assets. The initial concept for Libra would allow dollars to be the initial capital reserve. However, if the association board nominates that an alternate currency can prevail over the dollar, it could rapidly devalue the dollar. It appears that Congress and the general public are in a state of Future Shock. It is paralyzing their comprehension of the impact that a global digital currency would play on domestic and international markets.
The ability to crowdfund capital to invest in global markets with a unified currency will change the financial system forever.
Facebook is leading the advocacy charge into democratizing and regulating blockchain technology and cryptocurrency. Zuckerberg is persuading US lawmakers that current the financial markets and systems are outdated and desperately in need of an upgrade. He informed Congress that if the United States does not move quickly on establishing a framework for Libra, then China will assume dominant market share within a few months as they roll out their own global blockchain platform and cryptocurrency.
China has developed public-private-partnerships to build its blockchain and coin. China has the potential to grow value and capital reserves far beyond the capacity of the US and its allies. China will be able to aggregate far more data on its citizens and monitor spending habits to combat crime. Let us also be real in that the country that crowdfunds the most capital in one currency will be able to astute the global dominance of capital markets. This principle is how the United States has sustained world dominance in finance and economics since WWII.
Why is there so much resistance in the current financial system to upgrade or overhaul its policies and procedures? One congressman said, “it has taken us 50 plus years to establish the rules and regulations for our current financial system, and you want us to start from scratch?”. Another reason for the stiff resistance maybe by creating a more efficient transaction process lowers cost and reduces the dependence of bank float. The reason why bank remittance takes three days to transfer money is not due to transit time to fly or drive the money to its destination. It is due to the banking institutions floating the cash from one server to another while compounding interest in that time. It may not sound like a long time to make a significant return; however, it surmounts to a lot when you transact trillions of dollars.
Mountains are made from pebbles
Bitcoin, Libra, and other distributed ledger technologies offer a far more efficient alternative to traditional banking and transaction processing. A paradigm shift will occur when crowdfunding portals adopt digital currencies on their platform. The ability to crowdfund capital to invest in global markets with a unified currency will change the financial system forever.
Per Zuck, the plan for Libra is to establish a 1:1 ratio with the dollar, other currencies, and a basket of assets. It seems like a pipe dream to build a global digital currency on the gold standard, given that the dollar is no longer on the gold standard. How can we position a levered asset to back the liquidity of a global currency? Did we not learn from AIG in 2008 that insuring levered assets does not provide adequate liquidity in the event of a run on the bank?
It was probably hard for Zuckerberg to hold back on the actual intent of Libra and its association. The agenda of the world order requires all forms and bodies to assimilate in an orderly single file fashion. For all intent purposes, global currency is inevitable for globalization. Determining how the currency is traded and stabilized is the current roadblock to regulators and competitors. The value of a Dollar or Yuan is only worth what free markets determine as its value. Therefore, the proposal to homogenize and convert many currencies into a single currency is plausible. The global currency and economy should not be contingent on the success or failure of one country. A unified global economy and singularity are still many years out, although progress is being made to change the financial and economic systems we know today fundamentally.