Summary of the previous post: Libra coin is a token whose value is based on an ETF. Tokens creation and transfers are managed by a centralized database, but only members of the Libra association may access this database. Being part of the association needs an investment of 10M$ and it’s invitation-only. Normal users will have to go through the Calibra wallet. The token is actually being pushed by Facebook for forcing merchants into their platforms, but disguised as an attempt to “provide banking services to 1.7 Billions people”.
The whitepaper does not provide many important details about the ETF governance. Really, it does not provide any relevant detail at all. So take my take as educated guesswork. For sure, Libra coin is not a cryptocurrency. It’s a new form of digital pegged currency, like the Lebanese Pound but without a physical form.
If I overcome my disdain for the buzzwords marketing crypto-coating and I consider the idea by itself, I think it’s very interesting and it’s actually big at unthinkable levels. No fractional reserve, bank account in your smartphone, transparent value entirely managed by a trustable non-political entity (national politics), instant transfer of money. On paper, this really is dream money. So what’s the problem here?
How it would actually play out.
Let’s suppose that Libra Coin’s reach is half billion people, and that 1K$ are needed on average. This would make it an astounding 500B$ ETF, that is larger than the largest ETF currently available, the Spider S&P 500 (286B$). This is huge and could be even bigger. But there’s more, the fund would not traded for profit, but probably only for stability. Akin of a virtual nation, but run privately.
Then they would have to comply to all different regulations of literally all countries in the world, like paypal but worse, since they propose their own pegged currency and they need to explain to people what they are owning when they have Libra.
Finally, they have to make sure they don’t screw it up.
For what I see that is a bank and a virtual nation at the same time. There’s also the difficulty of managing a huge association made of completely different members, many of them businesses with their own, always changing, agendas. If all of this is viable, it would be a costly colossus. At that point it’s all about competition and what is cheaper w.r.t. Paypal or Moneygram, that are quite similar but manage many currencies at the same time, earn on currency exchange fees, and are, in comparison, much more agile.
Last but not least, there surely are moral issues in issuing a currency whose governance isn’t based on democratic values, but on private companies. I’m not an expert, but my gut feeling is that this is wrong.