CRYPTO MOVERS AND PRICES
STORY OF THE DAY
This week Libra announced a much scaled-down version of itself. We have long maintained that it was a wrong decision for Facebook to position what was a payment network with much potential, in a crypto wrapper.
Libra, as a reminder, released its initial white paper in mid-June 2019. The document and associated technical paper painted Libra as a private cryptocurrency backed by a basket of fiat assets. The plans called for a Libra Association, the details of which were never fully publicly released but counted some high profile corporates as commitments.
The story was top in mainstream media on announcement and regulators globally largely denounced the project. What followed was months of back and forth between Libra and various agencies culminating with both Facebook executive David Marcus and CEO Mark Zuckerberg testifying before the U.S. Congress. Ultimately, regulators never cooperated with the company's initial proposals and a plan B has been devised. This outline, described primarily through David Marcus Twitter posts, describes what is much more clearly stablecoin payment rails, as opposed to the more self-contained system that was initially outlined. There remain few solid dates around when such platforms will be available for general use.
The reality of the situation is that Libra was always going to be much more similar to a payment network than a cryptocurrency. In fact, we always felt original technical plans made little sense and that the only way this could function was like an AliPay or WeChatPay (which themselves are essentially stablecoin networks). Facebook's decision to position this as a new, innovative, private currency was ultimately what led to nearly a year of regulatory spats, false starts and what will ultimately be seen as a failure by many. Were this to be positioned as a competitor to those previously mentioned platforms, or U.S.-based Venmo, we find it hard to believe the company would have faced the same degree of regulatory scrutiny. Whether this promising business, i.e using Facebook's reach to create inter-user payment rails, will be permanently impacted by this PR mishap will be answered in coming years. For now, this is, unfortunately, likely to go down as a cautionary tale around a major established corporate jumping into cryptocurrency.