The proposed “Libra” is not really a currency, but something occupying the interstitial space between a gift card, a share in a mutual fund, a negotiable instrument and an IOU. But its implications could be huge.
By Jacob Bacharach and cross-posted from TruthDig
“Don’t be surprised,” said Terence Ray, one of the hosts of the Whitesburg, Ky.-based podcast “The Trillbillies,” “if Mark Zuckerberg starts trying to pay his employees in ‘Facebook Bucks.’ ” Ray made that comment in late May during a Means TV segment on the history of company money, or scrip, which was used throughout the 19th and 20th centuries by mining and logging companies in the United States. In some cases, scrip was still changing hands decades after it was made officially illegal by the Fair Labor Standards Act of 1938.
Lo and behold, not one week later, the business press began reporting that Facebook would, within the month, announce its own new proprietary cryptocurrency. What’s more, the tech giant would perhaps even “allow employees working on the project to take their salary in the form of the new currency,” a proposal of, at very least, dubious legality in the United States.
The actual announcement came this week—and it was more banal, stupid and terrifying than I had imagined.
This new currency, dubbed “Libra,” is, in the first place, not a currency. A consortium of investors—banks, credit card companies, venture capitalists, etc.—will pool millions or billions of dollars in order to purchase a “reserve” composed of “low-volatility assets, such as bank deposits and short-term government securities in currencies from stable and reputable central banks.” While the Libra will not be “pegged” to any particular currency—set, for example, to a fixed rate against the dollar—this reserve will be structured to “minimize volatility, so holders of Libra can trust the currency’s ability to preserve value over time.” This scheme stands in sharp contrast to something like bitcoin, whose wildly fluctuating values are purely speculative and whose only supposedly intrinsic value is an enforced scarcity: There can never be more than 21 million of its units.
The Libra is therefore not really a currency, but something occupying the interstitial space between a gift card, a share in a mutual fund, a negotiable instrument and an IOU…