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The UN recognises 180 currencies worldwide as legal tender, all of them issued by nation states. It does not recognise cryptocurrencies like bitcoin in this way, even if communities of enthusiasts have been treating them as a means of exchange for over a decade now.
Yet the latest addition to this group, Facebook's libra, threatens to do something that no other cryptocurrencies have come close to achieving: the state monopoly over the control and issuance of money is now under serious threat.
Facebook - World - Population - Users - Facebook
Facebook boasts over half the world population as active monthly users: 2.2 billion on Facebook, 0.8 billion on Instagram and 0.7 billion on WhatsApp. Combined with the fact that 1.7 billion adults worldwide have no bank accounts, a project like this is the perfect petri dish in which to create a truly global currency.
The independent Libra Council that Facebook proposes to oversee this new currency from Geneva will become nothing short of a quasi central bank. Consisting of 27 giant corporates plus Facebook, it will vet aspiring applicants who wish to join their ranks for a fee of US$10m (£7.9m); as well as manage the reserve of state currencies and short-term government bonds that will back the libra.
Model - Likes - Bitcoin - Exchange - Rate
This model is very different to the likes of bitcoin, whose exchange rate is driven purely by the supply and demand. In contrast, the Libra Council would be competing in global currency wars against other nation states.
Imagine ten years from now if, say, 40% of all US dollars are held on deposit by Facebook/the council to back the issued libra coins, which have by now become widely used across the world. We can hypothesise that US dollars might constitute a 30% weight of libra's asset-backing basket—to have a steady exchange rate for libra, the idea is to underpin it with a selection of...
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