The Zuckerberg coin is almost ready: the white paper, that is the document that illustrates its features, should be published on June 18th.
In 2020 there would be the launch, probably after having untied (or at least loosened up) the issues concerning regulation. Cryptocurrency should be called Libra and be governed by a group of large corporations.
How cryptocurrency works
It has long been thought that cryptocurrency would be called GlobalCoin. The news on the name is still mixed, but according to the Wall Street Journal and The Information, it would be “Libra”, like the company registered by Facebook in Switzerland last May (Libra Networks). This will certainly be a “stablecoin”, ie not a “pure” cryptocurrency, whose value is determined by trade and influenced by the protocol, but a currency anchored in a fiat currency, that is “paper”.
According to the German newspaper WirtschaftsWoche, which cites Laura McCracken, head of financial services and payments for Facebook for Europe, Libra would be anchored to a basket of currencies and not just the dollar. In this way there would be no dependence on the American currency, but the advantage of a stablecoin would be confirmed: having less volatility. Which means, at least in theory, an incentive to use as a real currency, to buy goods and services.
What really is Libra
However, stability needs guarantees. That is, traditional currencies, which must be kept by a third party. That’s what central banks do. The figure must be impressive, because it should ensure liquidation by users who, instead of spending their Libra on Facebook, decide to convert them into dollars or euros. This mechanism therefore requires centralization and is one of the reasons that make Facebook’s cryptocurrency very far from Bitcoin.
In a meeting with central bankers last May, Tobias Adrian (head of the International Monetary Fund’s market division) stressed this point: he does not mention Menlo Park, but the reference to the “social network” is clear. According to Adrian, Libra would be an “eMoney”: a virtual token totally (or for the most part) secured by deposits in traditional coins. So a digital version of something that exists physically. Something more like WeChat Pay and AliPay (in China) and M-Pesa (in Kenya) than bitcoin.
The weight of stability
The Chinese and Kenyan cases show that the model can have a very large audience. It works. The “digitalisation” of a currency has clear advantages. Adrian identifies four: he travels on devices that we have in our hands and are also widespread in countries with less solid banking infrastructures; has minimal transaction costs; in many cases (even if this is a crucial point for Facebook) social media and telecoms have a better reputation than banks; large platforms do not start from scratch but from a huge user base, which would make adoption faster. At the same time, however, Libra’s global reach could be a problem. Facebook will not only have to guarantee important reserves, but also in different currencies.
What is an “independent” consortium
To find the necessary guarantees and, at the same time, push the project, Facebook would have chosen to set up an independent consortium, at least in the form. Some large companies should pay Zuckerberg to buy a “node” of the blockchain (one of the “digital rooms” in which the transaction is validated) and they would manage it in exchange for an as yet undefined economic incentive.
According to the Wall Street Journal , among these managers there would be Visa, Mastercard, PayPal and Uber. And Stripe, Booking.com and the Argentine e-commerce MercadoLibre could also be added. The knots would cost $ 10 million. They would be a hundred, thus securing Menlo Park a billion dollars. Who pays also obtains an armchair in the consortium charged with guiding Libra. Waiting to know the details, there are more than sensible reasons that would have pushed Zuckerberg to this move. The billion collected is the guarantee with which to start Libra.
Having a sort of “board of directors” of the cryptocurrency would ensure a much more reactive management than the one distributed by bitcoins. At the same time, and this is clear, the operation would remain strongly centralized. Nothing to do with the initial idea of blockchains and cryptocurrencies, which had as their goal precisely to make money management more democratic. Indeed, in some respects it is the exact opposite. Facebook does not want to prevent transactions from moving from strong authority. He wants to become strong authority.
Facebook steps sideways
Facebook, explains the Wall Street Journal, will not be part of the consortium. It will thus delegate its management. Not bad: it will give a semblance of decentralization (very partial) but it will still have the basic technology and will remain the platform on which to spend. Without Zuckerberg’s social media, Libra’s value would be zero, as would the consortium’s decisions. For cryptocurrency, Facebook would be a little like what Android is for app developers and users.
I’m not telling you which apps to create or download, but to do that you have to go from here. At the same time, Zuckerberg would keep profit opportunities intact: transforming its social media into gigantic e-commerce could bring up to $ 19 billion by 2021 according to Barclays . With a double advantage: earn more and do it in alternative way to advertising. A necessary solution given the possible antitrust restrictions and the path traced towards a more “private” social network.
The big doubt: the rules
To distinguish between social and Libra, at least formally, would then be an advantage at the regulatory level. The cryptocurrency is, for now in power, a new, enormous power. Which will be observed very closely by the financial authorities. Zuckerberg knows this well and – for some time – he is gearing up. According to the Financial Times , the Facebook CEO has hired Ed Bowles, head of public affairs in Europe of the finance company Standard Chartered.
In practice, a lobbyist, in charge of closely following Europe’s moves. “Facebook has the right, like everyone else, to enter the market, but the problem is the link with its other activities and data collection,” said Olivier Guersent, director general of the EU Commission’s financial stability department . The recruitment of Bowles is consistent with other recent moves: Zuckerberg has met several representatives of financial institutions, including the governor of the Bank of England Mark Carney.
And in January he recruited Nick Clegg, a former British deputy prime minister, into the global affairs and communication team. Not forgetting that the project guide was entrusted to David Marcus: a loyal Zuckerberg, before making great Messenger and moving to the blockchain, he had been president of PayPal.