What is Facebook Libra Coin? Libra coin is a cryptocurrency project being led by Facebook. It is an open source digital payment solution allowing customers to make transactions through Messenger and WhatsApp without the need for a bank or credit card company. When I first heard about this project I only half understood why it was so important. The implications of this project are massive and represent a tectonic shift in financial policy, regulation, and business. If Libra Coin is launched, consumers like you and I would be quickly swept into the age of digital currency. For better, or worse, change is on the horizon. The question is will you be ready for it? Keep reading to understand how this project works and how it would impact you. Who Is Involved With This Project? Facebook, and 28 other well known companies have partnered to create what is known as the Libra Association. These companies are collaborating to provide support for customers and have also created a governing body for Libra Coin. Assuming Libra Coin is successful within facebook, the other companies would also adopt Libra Coin as a legitimate payment method for their own existing customer base. Why Does It Matter? Facebook alone has a reach of over 2 billion people worldwide. If you add the reach of all 29 companies involved in this project you would be have the equivalent of 1/4 of the world's population! With the creation of Libra coin, and a quarter of the worlds population having access to it, there will be the very real potential of disruption to traditional banking and credit card services. Clearly, if Facebook is able to successfully launch a digital currency it will directly challenge the US dollar and other leading world paper currencies. Obviously, a disruption of this magnitude does not sit well with the powerful world leaders who control our current financial system. In addition, Libra coin gives overwhelming evidence that cryptocurrencies are the future of money. With a third of the world population being exposed to Libra, it only stands to reason that Bitcoin and other cryptocurrencies will also continue to be mass adopted. What Advantages Would Libra Provide To Customers? Low cost money exchange - Being able to exchange money with anyone around the world without transfer or processing fees is a major upgrade over what traditional banks currently offer. Lower barriers for financial services - Millions of people around the world do not have access to traditional banking services. Libra would provide an "on ramp" for people to gain access to previously unavailable financial services. Essentially, this would help "bank the unbanked." Seemless interaction between traditional and digital financial services - Customers would be able to exchange value using Libra Coin or continue to use traditional payment methods such as credit cards and paypal. What Challenges Does Libra Face? Libra's biggest challenge currently lies in regulatory disputes. Here are a few of the major concerns that Libra needs to answer: 1) How will they protect consumer privacy information. (Facebook recently paid $5 Billion for consumer privacy violations.) 2) How will they fight against money laundering and terrorist activity (OFAC & BSA). 3) How will they handle fraud or transaction reimbursement. 4) How much influence will they have in international foreign policy events. 5) How will they comply with IRS and international tax requirements. Should We Trust Libra Coin? From a technological standpoint Libra Coin would be a trustworthy financial tool. The question is can we trust the company building it? When David Marcus (Lead Developer Of Libra) testified before congress he responded to these questions. He said that Libra Coin will be a separate entity from Facebook and that there will be no sharing of information between the two companies. In addition, Marcus said that Libra intends to be compliant with US banking regulation and therefore would be following the current OFAC & BSA regulations. Clearly this would allow for some level of government influence into international foreign policy through Libra Coin, however Libra would not operate independently from government policy. As far as fraud reimbursement and IRS tax requirements, David Marcus said that they would have a customer service department that would handle all such fraud requests and IRS forms would be mailed annually in a similar fashion to how banks currently fulfill IRS requirements. How does Libra Coin Actually Work? From a customer standpoint... Using Libra coin would be very simple. It would require having a digital currency wallet and being able to exchange wallet address with someone else to complete the transaction. From A Technical Standpoint... For every Libra coin that is issued there will be one dollar worth of assets backing the coin. It will be backed by a basket of traditional currency such as the Dollar, Euro and several others to add stability and delete volatility (known as a Stable Coin). Having a 1:1 ratio stands in stark contrast to our current fractional reserve system and offers the potential for a more stable economic foundation to build on. In essence, this would be a hybrid between traditional money and a true decentralized cryptocurrency such as Bitcoin. Is Libra Coin The Same As Bitcoin? No. Libra coin is an open source digital currency that is created and maintained by a centralized governing body. Bitcoin is decentralized and has no governing body or central authority. This is a major distinction. Companies such as Libra can be bullied and manipulated by governments while Bitcoin remains independent from the influences of government. Conclusion
Libra coin represents a direct threat to the major world economies and the people controlling them. It offers a much needed technological upgrade to our outdated financial system and shifts financial control into the hands of the Libra Association instead of central bankers and politicians. While Libra is not a fully decentralized network like Bitcoin, it does accomplish a step in the right direction for the advancements of digital currency. Clearly there are many important regulatory questions that need to be answered but one thing is for sure, Libra has put the world financial system on notice that major disruptions could be on the horizon.
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