The Libra is just the upshot of an entrepreneurial attempt to profit from the global market for payment services (and later perhaps also from the credit markets), and, of course, to collect as much precious transaction data as possible.
https://mises.org/wire/facebooks-fake-money
Starting in 2020, Facebook wants to offer its customers a global high-tech currency and infrastructure. The US IT giant says that this will provide many people around the world with easy and cost-effective access to the monetary and financial system. The new blockchain-based money is called “Libra.” Technically, it is something akin to a crypto-money-banknote covered by a basket of official fiat currencies (such as US dollars, euros, and the like). The heart of the Libra project is the “Libra Association” (LA). The non-governmental association, based in Geneva, Switzerland, is supported by founding members such as eBay, Facebook, Mastercard, PayPal, Spotify, Uber, Visa, as well as other renowned firms, and will be responsible for the operation and further development of Libra.
Libra will be created by participants depositing fiat currencies such as US dollars or euros with the LA, and the LA will then grant the depositors a corresponding Libra amount in a digital wallet, which can be used for payments via the Internet, smartphone, credit card or WhatsApp and messengers, i.e., Facebook’s chat services. The chances of success seem to be pretty good for the Libra: Electronic payment is a world-wide mega-trend. People seem to have become increasingly open to new technological ways of making payments. And if money can be sent to and fro via social media, many potential customers will presumably like it very much.
Traditional banks have good reasons to worry. The Libra is about to siphon transactions out of bank accounts and put them into the LA’s hands. Not banks, but the LA will collect the fees and will receive precious data on who pays what, when, and where. The banks will be left even more in the cold should customers begin to use the Libra for savings purposes as well. Because then they would also lose the time and savings deposits with which they refinance their balance sheets at low costs. Or think of the credit business: The LA may at some point also provide its customers with short-term consumer loans.
In any case, from a customers’ perspective it is a good thing if and when the competitive pressure in the banking business gains momentum; as is well known, competition stimulates the search for better products and lower prices, which benefits the customers. The now heightened competition from the fin-tech industry is undoubtedly quite a challenge for many banks. Not least because for decades state regulation has kept unwelcome outside competition from their backs, thereby, however, weakening their innovative strength. But our sympathies have to be first and foremost with the people demanding banking and financial services, not with the banks delivering them.
The critical question, however, is this: Is the Libra really good — or sound — money? Unfortunately, this question cannot be answered in the affirmative. Read the rest of this entry »
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