There are many takes on the Facebook roll out of a new cryptocurrency called Libra. Most experts in the field have mixed feelings about this new attempt to provide an alternative to fiat currency. There are some good and bad qualities of this new product.
The good is that Facebook is providing yet another alternative to fiat currency. Anything that disrupts the central bank and provides alternatives for consumers to pay for products will disempower banks and the Federal Reserve’s monopoly over currency. One of the great qualities of cryptocurrency is that power is being pulled away from the big banks that have been provided government subsidies and the central bank giving people more control over their privacy and how they pay for products and services. Kudos to Facebook for entering the field and participating in the burgeoning cryptocurrency market.
Jeffrey Wernick, a leading expert and proponent of Bitcoin, makes the case that we need an alternative currency to both restore sovereignty to every American and to save our people from a collapsing federal government. Wernick makes a compelling case that the Federal Reserve has set up a system where the banks can game the system to amass great wealth while average Americans get screwed. He argues “the asset bubble created by the Fed only rewards those who can leverage a lot and at a cheap cost. Which represents the less than 1%. The Central Banks are only working on their behalf. And everyone else is financing it. It represents a huge wealth transfer from everyone else to the less than 1%.” One way to fight back is by buying Bitcoin because it will restore power to the people while it “cannot be confiscated from you.” The problem with Libra is that while it helps people to take back sovereignty from the federal government and the Fed, that is transferred right over to Facebook – not an optimal way to pull back one’s privacy.
The misguided attempts to use the government power to impose antitrust changes to the company are an attack on freedom, because government should never be used to break up a company because they are “big.” Political interests want to use that company for populist political goals. The argument that Libra furthers the monopoly hold that Facebook has over the economy is a bad one and will lead to even more government control over consensual commerce. Sadly, many on the left have been beating up the big tech companies because they are successful and many on the right are angry that liberals at these high-tech companies have used the companies to marginalize conservative voices. These are not good reasons to further empower the government to impose solutions that will merely shift the power to control speech from private consensual actors to the government. I am of the opinion that antitrust law should be abolished to defang the federal government from using intimidation to get what they want from job creators like Amazon, Google, Facebook, Twitter and Apple.
With the good, there comes some bad and the bad outweighs this good when it comes to Libra.
There are some really dangerous aspects of this new “cryptocurrency.” First of all, there is a preliminary question as to whether this even qualifies as a cryptocurrency. The qualities that many treasure as part of a functioning cryptocurrency is decentralization and a blockchain that is above reproach. Libra is going to be run from Geneva, Switzerland, centralized in that headquarters and run through a permissioned blockchain. The gold standard of cryptocurrency is Bitcoin, because it is completely decentralized and not controlled by any one person. The Verge on June 26, 2019 made the case that “compared to the OG cryptocurrency, bitcoin, well… it looks less like a cryptocurrency. For instance: bitcoin is a permissionless system. You participate through proof of work by competing to solve a puzzle that lets you add a block to its chain. What that means, essentially, is that anyone can participate. This is one of the most significant ideas behind Satoshi Nakamoto’s 2008 paper: bitcoin requires consensus, not trust.” Libra, by contrast, is a digital method of the transfer of value that seems to fall far short of a traditional definition of a “cryptocurrency.”
Now for the ugly. If Libra becomes the standard for cryptocurrency, government is going to have a strong motivation to crack down and regulate cryptocurrency out of existence. Many crypto startups have been plagued by mismanagement, fraud and good old-fashioned business failure. Facebook is likely to market Libra as a centralized alternative, not a supplement, to Bitcoin. That would be a mistake and would end up hurting the whole movement towards providing borderless alternatives to fiat currency. If Libra becomes a magnet for government hate, Bitcoin, Ethereum and other decentralized digital currencies could become collateral damage.
We are early in the rollout of Libra and there is no way to know if this new attempt at an alternative currency becomes a legitimate cryptocurrency or merely a way for Facebook to jump into another market. Either way, Libra has disrupted the disruptive cryptocurrency markets and time will tell if this is a good, a bad or a really ugly thing.
Brian Darling is former Counsel for Sen. Rand Paul (R-KY).