Facebook released the white paper for their “Libra” cryptocurrency on Tuesday, and it’s led to some mixed reactions in terms of how the new digital currency will affect the bitcoin price over the long term. Some view Facebook’s currency project as nothing more than PayPal with the blockchain buzzword thrown on top, while others say it could eventually lead to further adoption of traditional cryptocurrencies like bitcoin.
Let’s take a closer look at the details of the Libra cryptocurrency and what it means for bitcoin.
The Libra is Not Bitcoin
The Libra and bitcoin are two completely different animals. Bitcoin is a decentralized network that is meant to be permissionless and censorship resistant, while Libra is operated by a consortium of large corporations that will still be subject to regulatory pressure from various governments around the world.
Indeed, lawmakers are already pushing back against Facebook’s attempt to create their own digital currency. According to Bloomberg, French Finance Minister Bruno Le Maire has stated that the Libra must not be allowed to become a sovereign currency. A German member of the European Parliament has also said that regulators should be on “high alert” in response to the release of the Libra white paper.
Additionally, in the United States, House Financial Services Chairwoman Maxine Waters has requested that Facebook halt their cryptocurrency plansfor now.
In addition to their differences as payment networks, bitcoin and the Libra are also polar opposites in terms of monetary policy. Bitcoin has its own predetermined, apolitical supply schedule, while the Libra is simply backed by a basket of government-issued currencies.
According to Reuters, Mastercard’s Jorn Lambert has already stated the Libra project may not even launch if it receives too much pushback from regulators.
Unlike Bitcoin, Facebook’s Libra has identifiable parties behind the network who can be targeted with regulation. If Libra users were able to act in a permissionless, censorship-resistant manner, it would only be a matter of time before regulators came in to shut the whole thing down.
The inability for Facebook’s Libra to operate in a permissionless manner puts into question whether it should be considered a real cryptocurrency at all — at least in the minds of bitcoin purists. The Winklevoss Twins, who formerly battled with Facebook CEO Mark Zuckerburg over control of the social media company, also felt the wrath of those who wish to stick with the decentralized, censorship-resistant nature of bitcoin due to their association with a custodial, regulated cryptocurrency payments app that allows users to spend their bitcoin and altcoins at Starbucks, Whole Foods, and other major retailers.
While some regulators have called for outlawing cryptocurrencies, especially those focused on anonymity and privacy, the point of these networks is to be resistant to such measures.
It should also be noted that we’re talking about Facebook here. The social media giant, with all of its privacy-related scandals over the years, is effectively antithetical to everything bitcoin represents. Amazingly, it’s likely that Apple’s recently announced credit card will have better privacy protections for consumers than what Facebook is going to offer with the Libra.
In summary, Libra appears to be nothing more than a variation of the traditional financial system. This should not have much impact on the bitcoin price, as the world’s first and most popular cryptocurrency’s key value proposition is as an apolitical store of value and medium of exchange. In other words, the Libra has no effect on the “digital gold” market.
Crypto, Blockchain, Cryptocurrency, Facebooks Libra, Bitcoin Price, Cryptocurrency Affect, Libra