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Economics

منع عملة فيسبوك "ليبرا": خطوة لابد منها

Jun 20, 2019 Katharina Pistor

نيويورك- كشفت شركةفيسبوكللتو عن أحدث عروضها للسيطرة على العالم:"ليبرا"، وهي عملة مشفرة صممت لتكون بمثابة أموال خاصة في أي مكان على هذا الكوكب. وتزامنا مع إعداد للمشروع، يجري مارك زوكربيرغ، الرئيس التنفيذي لشركةفيسبوك، مفاوضات مع البنوك المركزية، والهيئات التنظيمية، و 27 شركة شريكة، ستساهم كل منها بما لا يقل عن 10 ملايين دولار. وخوفًا من إثارة مخاوف تتعلق بالسلامة، تجنبتفيسبوكالعمل مباشرة مع أي بنوك تجارية.

ويبدو أن زوكربيرغ يدرك أن الابتكار التكنولوجي وحده لن يضمن نجاح ليبرا. إذ يحتاج أيضا إلى التزام من الحكومات بتطبيق شبكة العلاقات التعاقدية التي تقوم عليها العملة، والمصادقة على استخدام عملاتها كضمان. وفي حالة مواجهة ليبرا إقبالا كبيرا، فستضطر البنوك المركزية إلى توفير السيولة.

والسؤال هو ما إذا كانت الحكومات تتفهم المخاطر التي قد يشكلها مثل هذا النظام على الاستقرار المالي. وقد يبدو وجود نظام سداد خاص بدون أي احتكاك ويستخدمه 2.6 مليار مستخدم نشط فكرة جذابة. ولكن كما يعلم كل مصرفي وصانع سياسات نقدية، تتطلب أنظمة الأداء مستوى من دعم السيولة لا يمكن لأي كيان خاص توفيره.

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0 Comments on this paragraph, 34 Comments on this article

John Sweeney Dec 22, 2019

I hate to tell the author but this is a competitive situation. China has a candidate for a world-wide cryptocurrency now. Want to sign up?
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kiers sohn Jul 9, 2019

Then there's the privacy angle. I don't want a lane on my forehead that says "Facebook inside (my butt)". If Facebook uses Libra as a Trojan horse for a universal digital identity movement that replaced all passwords everywhere, then credit card companies, who sit on the board of Libra, will have backstage access passes to all my posts or comments or dialogs online. Likewise, Facebook will have access to my credit card spending patterns of the spending uses a sign-in using the patented Libra identity token. I'd this China, where a new form of social credit is coming to life? Is the US so craven as to copy China?
- kiers sohn Jul 9, 2019
  
  (the above was written from my mobile device so please excuse the typos that got cemented into place). Also, please note the full upshot of my comment: Facebook cementing it's digital identity into the market via first mover, and scale, implies facebook will see all credit card transactions used via sign-on with that digital identity, even though the user is not using Libra! End this nonsense now.
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Jonathan Haskett Jul 9, 2019

Facebook is, by itself, creating a currency that will be available to 2.3 billion people (about the population of China and India combined) and is outside the regulatory control any government or national bank. Meanwhile the bubble/collapse of one sector of the just the US economy nearly tanked the entire global financial system. This is a cause for concern, to put it mildly. This currency has no controls and no accountability (certainly not to any elected official). What is to prevent for, example, a facebook driven social media inspired bubble in some emerging markets followed by an 90 mph over-the-cliff panic withdrawal from those same markets because of some *other* social media rumor. Regular old capital flight has kicked the world economy around plenty even with *some* controls and accountability and potentially at a much *smaller* scale than is possible with facebook. The full backing by "real" currencies wouldn't stave off the potential collapse of vulnerable economies potentially triggering a world wide recession and requiring real governments through multi-lateral lenders to provide a real bailout.

Facebook does not have the expertise, the accountability or the sense of responsibility to be entrusted with starting a currency.
- Neil MacLean Dec 22, 2019
  
  Your last sentence encapsulates it all.
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Jacob Bjorheim Jul 7, 2019

John Ryding is mostly right. But why should national currency that backs the Libra be invested in debt obligations?
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John Ryding Jun 24, 2019

There are a number of erroneous assertions and claims in this article but at the root cause is the failure to distinguish between private money created through fractional reserve banking and private money created through a currency board. The proposal is that Libra will be 100% backed by reliable fiat money (dollars, pounds, euro, Swiss francs, yen). Libra will be created (minted) as currency is paid in to the reserve bank and retired (burned) when the currency is withdrawn. Unless there is malfeasance and the collateral is stolen, there is no issue. Let's say half of the holders of Libra wanted to cash them in in a short period of time. No problem. The Libra Reserve sells the government bonds it holds, returns the cash to the holders of Libra, and then extinguishes the Libra. This is not a George Bailey run-on-the-bank moment. Now if half the depositors at a bank wanted to cash in their deposits in a short period of time, this would pause severe problems because the deposits could be tied up in loans and as the bank runs out of high quality liquid assets, it would have to go to a central bank and borrow against collateral (lender of last resort). This article amounts to nothing more than scaremongering in suggesting Libra could take down the global economy.
- Ralph Musgrave Jun 29, 2019
  
  I agree - more or less. The only potential problem I see is that Libra falls for the temptation that all commercial banks fall for, namely borrowing short and lending long and doing that to too great an extent. E.g. if Libra put 99% of the money it receives into long term government debt or commercial debt, it could get caught short. But if regulators stop Libra taking that risk, I don't see the problem.
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- Vesalius .0 Jun 25, 2019
  
  All of your criticisms are in the subjunctive mood: repeating merely that FIAT backing "will be," present in ample degree, despite the fact that, at present, this is simply not the case. The assumption or assertion that this state of affairs is a guarantee is controverted by the U.S.'s own hesitation and concern related to the very premise of the Libra project:
  
  https://www.cnn.com/2019/06/25/tech/facebook-libra-hearings/index.html
  
  and
  
  https://thehill.com/policy/finance/450074-house-panel-to-hold-hearing-on-facebook-cryptocurrency-project
  
  Considering that fact, it is fair for the author to make comparisons to MMFs; however, the scale of Libra, in terms of FIAT-backed buy-ins, presumes that the individual institutions within the "Libra Group" can match the full weight of the capital being invested by individual users or institutions (to start and barring further support from centralized banks across the globe). There is also the issue, which, again, was raised (albeit in an understandably cursory fashion) in the article, of obtaining and retaining the support of centralized banking institutions, whether state-based or private, a prospect which has, again, yet to manifest.
  
  I think the premature promises made in the "White Pages" for Libra are what are at issue: even if they can deliver on the projected stability and scalability of the project, there is no such thing as financial security in perpetuity, especially for a private, international tech firm that has yet to dive headlong into international financial markets as a currency-producer, let alone navigate the complexities of international financial regulations.
  
  The "buy and burn" strategy, as you put it, presupposes that a sudden financial downturn will not occur at some point in the future, no matter how distant and how localized, even to the handful of centralized banks that are making the initial capital investments. If just one of these institutions were to fail to be able to match their FIAT backing, there is the potential for a cascade effect, resulting in the additional demand for liquidation to feasibly be distributed among the remaining institutions within the group.
  
  Again, however, this is all speculation at this point, as the state-based, "Federal" banks of the world (considering Facebook, with its 2.6+ billion users is an international organization that will have to conform to the institutional practices of any nation-state that would endorse and back the liquidity of its "product") have yet to support it in confidence. Libra is an interesting idea, but with an impending House Committee Meeting, it's apparent that many world governments are reticent, to put it lightly, to grant an endorsement of this pioneering system of crypto-currency reinvention.
  
  Long story short, I think your statement that many of this article's assertions are erroneous might be a matter of wishful thinking, and the author has in fact provided factual, concrete evidence as to the *current* state of the project, not what it merely *hopes* to be.
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Peter Lappo Jun 24, 2019

Did this person read any of the Libra documents?
- Vesalius .0 Jun 25, 2019
  
  I did. All of the language contained within it is in the subjunctive mood: this will happen; this is planned to happen. None of the promises made, and they are lofty, currently have the support of the organizations (outside of the limited "Libra Group) and nation-states that could actually provide guaranteed liquidity to the currency in international markets (as, with Facebook's operating in more countries than I can even guess, with its 2.6+ billion users), and navigating international, nation-state-specific financial regulations is a tall order for a tech company who wishes to become a currency producer.
  
  The U.S.'s own House Financial Services Committee panel meeting, scheduled for July 17th, where Zuckerberg will be questioned as to the details of how exactly the Libra "White Pages'" promises can actually be lived up to, demonstrates the reticence of the United States to support the project, with (as of right now) wishful promises regarding liquidity support and overall financial structure as the only "evidence" and promissory guarantees put forward by the company that Libra is in fact a feasible undertaking.
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Mauricio Duran-Loriga Jun 24, 2019

Think of LIBRA in these terms:

1) Facebook takes your dollars/Euro/yen etc and in exchange gives you its own digital token (never a currency), in essence Facebook gives you a digital entry book in exchange for real money. Seems unbalanced.

2) Once your real money is in the Facebook's bank account, Facebook invests it for its sole profit. You have been given a digital entry in a ledger, you can only spend that credit. You will never be able to invest it. Seems unbalanced.

3) Facebook does not want you to ask for a withdrawal. Facebook does not want to give you back real money in exchange for their own digital token.

4) Libra would be a perfect tool to enable massive money laundering by the bad guys, since the flow of money would be under no regulatory supervision. Even drug dealers could base all their trades in LIBRA. Once paid through LIBRA, they could spend their LIBRAS buying stuff and paying their sicarios. You think Facebook will even be able to track any of that? But seriously...

5) If people deposited their real cash in Facebook in exchange for LIBRA tokens, Facebook would cause massive disruption in the way the world is financed. Credit would collapse, literally. Basically Facebook would control the entire banking system size and direction). How horrendous does that sound?

6) Libra is registered in Switzerland as a digital coin. Facebook is nowhere registered as a banking institution. But it wants to become a worldwide bank overnight with no regulatory supervision at all in any country of the world.

Cryptos for dummies.
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douglas ungredda Jun 23, 2019

In addition to Mrs Pistor justified concerns, being Libra subsidiary of Facebook's parent company, there is always a potential conflict of interest. Facebook with LIbra may / could arm twist governments in any form? Lets just imagine how the US Comptroller of the Currency would react upon the hypothetical news that Boeing Aviation at the height of a crisis would be tinkering with the idea of issuing a competing crypto currency (call it MAX) or buy a big tier Bank,
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New Cavendish Jun 23, 2019

This article is absolutely correct. The new "currency" raises all the classic bank-regulatory problems -- credit risk on the "issuer" of the currency if it mismanage reserves; questions about the appropriate use or investment of the reserves by the issuer; control of the issuer by Facebook and the other sponsors; exchange-rate risk that users may not understand, especially if tied to a pool of currencies; operational risk if there are technical failures; political risk in multiple countries. Plus the separate privacy risks. All of this can be addressed if there is political will to do so. But (a) there should be a democratic decision in the relevant countries whether we want to go that way and (b) if the answer is yes, then there has to be serious, credible regulation by the appropriate domestic (Fed, Bank of England, etc.) and international (Financial Stability Board, IOSCO, Basel Committee) authorities. This must not be rushed. All the risks must be examined and managed.
- Peter Lappo Jun 24, 2019
  
  Can see its worse than any other fiat currency
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john mesrobian Jun 23, 2019

Libra along with the other Crypto Currencies are Fools Gold and Fools Investments. Then we have the security of the investment, too many cases of Crypto Currency Accounts disappearing, deposit firm goes under, theft ( inside and Outside). accounts and exchanges can and will be frozen and gated.

Better Off in Real Hard Money Cash or Physical Gold vs Crypto's
- Jonathan Haskett Jul 9, 2019
  
  Very much agree. However when enough people are taken in by a disastrous financial vehicle, when it crashes it can take the entire economy with it. The 2008 housing bubble being the prime example. So it's not just an investment risk for the people investing, when there are enough of them it is a systematic risk.
  
  Dodd Frank never envisaged this when it set up the mechanisms to look at systematic risk.
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Jacob Bjorheim Jun 23, 2019

Ms. Pistor is certainly right in picking up the Libra story that hit the press this week. In her analysis she is mostly wrong however. The Libra will not give rise to a new Irish, MMF, or back-stop debacles if it is structural set-up is non-fractional and backed one-to-one with central bank money, and not securities. IMF’s SDR comes to mind. The upcoming debate should therefore leave the technicalities behind and focus on the bigger issue: do we want a dual currency system that puts the private profit and monopoly motive ahead of the public policy mandate of central banks?
- Jonathan Haskett Jul 9, 2019
  
  Interesting point. Just wanted to point out that unsecured securities are not the only risk. Vast, uncontrolled and extremely rapid captial flows made possible and amplified by social media could also crash vulnerable emerging markets the currency itself is fully backed 1 to 1. The ensuing economic meltdown could be at a scale to cause a world wide recession.
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Winthrop Thies Jun 23, 2019

Ms Pistor assumes governments will "bail out" Libra in the event of a run. This misunderstands Libra's basic architecture and disregards the history of all cryptocurrency problems to date.
Unlike bank accounts, which in fractional-reserve banking used everywhere are only partially backed by reserves, Libra definitionally will be 100% reserved by debt securities denominated in leading currencies. Being 100% reserved there is little likelihood of a run.
In the unlikely event a person owning Libra wanted to "cash in" his account, he'll receive his pro-rata share of those securities, not a set dollar, pound, euro or Swiss franc amount.
Again, as to the history of cryptocurrencies so far, no government has felt compelled to bail out
a failed exchange (like Mt. Gox). Why should a government do that? Governments do not back private transactions when they founder. Note that Iceland did not make whole depositors when all its banks failed in Great Recession. Arguably Ireland was foolish to bail out its banks and assume their crushing liabilities. - Winthrop Drake Thies
- Paul Friesen Jun 24, 2019
  
  I think you've convinced me that a run is unlikely or even impossible (still need to think about it). But there do seem to be other reasonable concerns around money laundering and other illegal activity. Do we really want a payment system that government cannot touch and where law enforcement cannot trace anything?
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- Derryl Hermanutz Jun 23, 2019
  
  You’re right. Libras will be like 100% reserve-backed bank deposits in a checking account that pays no interest. To buy Libras you will pay bank deposits, which Libra will keep, or use to buy interest-bearing government securities. If you want to cashout, Libra will pay you back your bank deposits. New Libras are created when people pay bank deposits to buy them; Libras are un-created (cancelled; extinguished) when people withdraw their bank deposits from their Libra account. Which is much like a commercial bank buys your cash when you make a cash deposit, and issues a bank deposit to pay for it. Then when you make a cash withdrawal, the bank deposit is cancelled and the bank gives you back your cash.
  
  Unlike bank deposits in commercial bank deposit accounts that are denominated in a national currency, Libras will be a global currency, payable to anybody who has a Libra account, anywhere on Earth. Libra claims the interest they earn on the bonds (securities) they buy will finance their operating costs, so they can keep transaction fees low.
  
  I was also skeptical when I first heard about Libras. But when I read how they will actually be structured as a 100% reserve-backed payments medium that can be paid in any country instantly, without the fx costs and the 1-2 day transaction delays, I saw that Libras will be structured in much the same way monetary reformers argue commercial bank deposits should be structured: as a safe, fully reserve-backed payments medium that is readily convertible into any national currency.
  - Peter Lappo Jun 24, 2019
    
    Agreed
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- Ologunde Fabunmi Jun 23, 2019
  
  ☝
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Daniel F. Girolamo Jun 21, 2019

It is a process of evolution, blockchain systems, cryptocurrencies, well applied can contribute to the development of the global economy, if the emission system of Libra companies operates with 100% support there is no risk of insolvency .
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P. Kamath Jun 20, 2019

We have banks, stock Exchanges, hedging, bit-coin currency and Libra crypto-currency why not! More choices to better the human lot😃!
- Aris Haegermann Jun 23, 2019
  
  What a fine joke! :D
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Paul Daley Jun 20, 2019

Interesting. But Facebook is supposedly creating this system in order to harvest information; it may be able to maintain a 100 percent reserve. Where is the risk in that case?
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منع عملة فيسبوك "ليبرا": خطوة لابد منها

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