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Facebook’s Libra cryptocurrency is generating an immense amount of hype. Some hail it as the beginning of the end of sovereign fiat currencies. Others believe it will draw people into the cryptocurrency world, leading them inexorably to place their faith in the One True Cryptocurrency, Bitcoin. And others worry about the effect on central bank monetary policy and the possibility that a run on Libra could trigger another financial crisis.
I think this is all massively overblown. But there is one aspect that should worry everyone – and almost nobody is talking about.
Look - Claim - Libra - Currencies - Currencies
Firstly, let’s look at the claim that Libra could replace sovereign currencies. This is fundamentally nonsense. Sovereign currencies are the vehicle in which governments accept taxes. Unless foolhardy governments accept Libra as an alternative to their own currencies (believe me, this is not a good idea), people will always need sovereign currency. And no, governments are not about to disappear and taxes come to an end. Dream on, crypto-libertarians.
What about Libra replacing sovereign currencies for day-to-day transactions? Facebook says:
Time - Services - People - Businesses - Bills
In time, we hope to offer additional services for people and businesses, like paying bills with the push of a button, buying a cup of coffee with the scan of a code or riding your local public transit without needing to carry cash or a metro pass.
"In time?" Dear oh dear. I can pay bills with a few keystrokes on my smartphone, buy a coffee by scanning a contactless card or QR code on my phone, and touch in and out with a contactless card on London's Tube. I can transact using contactless cards or a smartphone all over Europe and in many countries outside Europe too. The Americans who wrote the whitepaper really should get out more.
Sort - Payments - People
More importantly, these are not the sort of payments that really matter to people....
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