Opinion on Libra and why fortune 400 companies are backing it
As mentioned in the whitepaper, Libra’s mission is to enable a simple global currency and financial infrastructure that empowers billions of people, a low-volatility cryptocurrency, and a smart contract platform that together aim to create a new opportunity for responsible financial services innovation.
Libra is set to exploit the advent of the internet and mobile broadband that has empowered billions of people globally to have access to the world’s knowledge and information, high-fidelity communications, and a wide range of cost-efficient and more convenient services. This connectivity has driven economic empowerment by enabling more people to access the financial ecosystem. Working together, technology companies and financial institutions have also found solutions to help increase economic empowerment around the world. Despite this progress, large swaths of the world’s population are still left behind, and 1.7 billion adults globally remain outside of the financial system with no access to a traditional bank, even though one billion have a mobile phone and nearly half a billion have internet access.
For a lot of people, parts of the financial system look like telecommunication networks pre-internet. Twenty years ago, the cost of sending me a simple message was high. Now everyone with a smartphone can communicate across the world for free with a basic data plan. Back then, telecommunications prices were high but uniform; whereas today, access to financial services is limited or restricted for those who need it the most — those impacted by cost, reliability, and the ability to seamlessly send money.
Blockchains and cryptocurrencies have several unique properties that can potentially address some of the problems of accessibility and trustworthiness. These include distributed governance, which ensures that no single entity controls the network; open access, which allows anybody with internet connection to participate; and security through cryptography, which protects the integrity of funds. But the existing blockchain systems have yet to reach mainstream adoption. Mass-market usage of existing blockchains and cryptocurrencies has been hindered by their volatility and lack of scalability, which have, so far, made them poor stores of value and mediums of exchange. Some projects have also aimed to disrupt the existing system and bypass regulation as opposed to innovating on compliance and regulatory fronts to improve the effectiveness of anti-money laundering. Facebook believes that collaborating and innovating with the financial sector, including regulators and experts across a variety of industries, is the only way to ensure that a sustainable, secure and trusted framework underpins this new system. And this approach can deliver a giant leap forward toward a lower-cost, more accessible, more connected global financial system.
To assist this mighty venture, Facebook has enlisted 27 other companies and organizations to ally referred to as the Libra Association, which is headquartered in Switzerland. These companies span several industries and include payment systems, like Mastercard, Mercado Pago, PayPal, Payu, Stripe and Visa, technology giants and marketplaces, like Booking Holdings, eBay, Farfetch, Lyft, Spotify and Uber, telecommunication colossus like Iliad and Vodafone, blockchain ventures like Coinbase, Xapo, Anchorage and Bison trails, Venture Capitals like Ribbit capital, Thrive capital, Breakthrough initiatives, Union Square Ventures and Andreessen Horowitz as well as non-profit and multinational organizations and academic institutions like Kiva, Mercy Corps, Creative Destruction Lab and Women’s World Banking. In fact, by the target launch date of early 2020, Facebook hopes to have recruited over 100 firms and corporations into the Libra Association, which will, in turn, make it one of the most significant alliance the financial world has ever seen.
From the look of things, Libra is set to disrupt the global financial system, including trading and monetary policies because Facebook is used by over a quarter of the world population. As such, a corporation as mighty as this, as well as others that form the Libra alliance, are bent on controlling the global economy, financial decisions and privacy of their users to their gain.
This has already spurred some reactions from the lawmakers of the United States, where they wrote an open letter to Mark Zuckerberg and two other key figures involved in the creation of Libra.
A part of the letter reads; ‘while Facebook has published a “white paper” on these projects, the scant information provided about the intent, roles, potential use, and security of the Libra and Calibra exposes the massive scale of the risks and the lack of explicit regulatory protections. If products and services like these are left improperly regulated and without sufficient oversight, they could pose systemic risks that endanger the U.S., ‘the US dollar’ and global financial stability. These vulnerabilities could be exploited and obscured by bad actors, as other cryptocurrencies, exchanges, and wallets have been in the past. Indeed, regulators around the globe have already expressed similar concerns, illustrating the need for robust oversight. Investors and consumers transacting in Libra may be exposed to severe privacy and national security concerns, cybersecurity risks, and trading risks. Those using Facebook’s digital wallet – storing potentially trillions of dollars without depository insurance- also may become unique targets for hackers.
As such, these lawmakers proposed that it is imperative that Facebook and its partners immediately cease implementation plans until regulators and Congress have an opportunity to examine these issues and take action, as failure to cease implementation before it is examined, risks a new Swiss-based financial system that is too big to fail.
It is important to note that the real power of world rule resides with the global financial markets, and this is what these companies are after if one can read between the lines (in the whitepaper). Through this, they will be able to dominate the decisions of both corporations and governments, demanding ever higher financial returns to shareholders regardless of the cost to society. The costly reality is masked by increases in the stock market and GDP indices that create the illusion of increasing prosperity. The question is should Libra stay, or the alliance be disbanded to curtail a brewing global threat.
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