Libra is a digital currency that is currently in the early stages of development. It is evidently being developed to bring reasonably priced financial services to those who have difficulty accessing the financial system. It is estimated that 1.7 billion adults globally remain outside the financial system with no access to a traditional bank.

There are several interesting things about Libra. It is intended that it should be a cryptocurrency using blockchain technology but, unlike conventional cryptocurrencies, its value will be backed by a range of securities held by custodians. The idea is that the currency should be stable in maintaining its value and not subject to the volatility that plagues other cryptocurrencies. Another interesting factor is that Facebook is the lead developer.

When I first heard about Libra, I thought the idea sounded interesting but having Facebook as the prime mover rather put me off with all the controversy surrounding that organisation in terms of its data security record. Some of the other backers read a bit like a who’s who of corporate America. On looking into the governance arrangements further, however, I read that the intention is to have a governing entity that is comprised of diverse and independent members. This is evolving into the Libra Association, an independent not-for-profit membership organisation based in Geneva, Switzerland.

The opportunities for Libra are immense. The market is clearly global and is not restricted to those who have difficulty accessing financial services at the moment. Libra could be used by anybody who has access to a smartphone. If the charges are reasonable, then Libra could be in pole position to compete with traditional banks and financial systems.

This could create an interesting situation where Libra’s customers get a really good deal but at the same time, this would concentrate a huge amount of power in the hands of the Libra Association. Weaker, smaller currencies may fall by the wayside and central banks risk being stripped of much of the power they wield today.

Libra just might be the disrupter that could transform finance, but huge hurdles stand in its way. The technology will have to be tested and proven. If it becomes successful, who will have the capability to provide the securities to back it? Will it be able to cope with diverse regulatory environments? Perhaps the greatest obstacle will be national interests, in particular, those of the USA. It is difficult to see the US government accepting any challenge to the dollar’s primacy.

As I understand it, once the system has reached maturity Facebook’s role in the governance of the Libra Association will be equal to that of its peers. On the other hand, Facebook is still likely to wield considerable influence due to the volume of users it is likely to have on the system. It is also clear that the private backers of Libra stand to make a great deal of money from it if it is a success.

Having said all this, I believe that Libra should be given a chance. It could provide a secure, stable alternative to national currencies which can be manipulated by corrupt politicians. It could also allow access to secure, reasonably priced financial services for millions who currently don’t enjoy such facilities. It could also provide a seamless international purchasing facility without having to go through all the hurdles and charging regimes that can currently apply to such transactions. If it is seen as a facilitator, rather than a threat, it might just succeed. A lot depends on how the governance arrangements mature. It is also being launched at a time when globalisation is on the back foot so it may not necessarily be an opportune moment, though internationalists may well be supportive.

The goal for Libra, according to their recent White Paper, is: “A stable currency built on a secure and stable open-source blockchain, backed by a reserve of real assets, and governed by an independent association.”

“Our hope is to create more access to better, cheaper, and open financial services – no matter who you are, where you live, what you do, or how much you have.”

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