By Alejandro A. Tagliavini *
Facebook, which has some 2,600 million users, “will not offer the Libra digital currency until it has resolved the regulatory doubts and received the appropriate approvals.” The statement, obviously, is due to the possibility that they would not let it operate otherwise.
From the Federal Reserve to the European Central Bank have shown their disapproval to a global private currency that competes with sovereign currencies. The ineffable Trump wrote on Twitter that “cryptocurrencies help drug trafficking, money laundering, and volatility.”
The establishment of central bankers and regulatory agencies around the world see Libra as a “potential systemic risk” or as a rival to the financial system that would be “out of control”. And that is the problem. What would happen to politicians and bureaucrats if they did not have control over money? Who would pay the taxes they charge? Probably nobody and that is the real problem.
Let’s see. In a healthy, natural market, people are happy to pay for what is useful to them, otherwise they would be left without the service. Undoubtedly you would prefer to be given a car but given the impossibility of this happening since the factory needs money to manufacture what you want, you will be happy to pay for your favourite car, if you want to do so.
Politicians do not work like that, they force you to pay taxes, even if you do not have the money and although you hate and do not use the service, they offer you. Frankly, it is not entirely clear to me what the great difference with slavery is.
By the way, private entities have proven throughout history to be more serious and reliable, because they play with their reputation and their own money, while politicians do not play with their money and corruption is not an obstacle: in all countries are countless officials strongly suspected and, nevertheless, they continue their political careers as if nothing.
Facebook would create Calibra, a company that will manage the cryptocurrency from Switzerland what would lead the central bank of that country to be the regulator. The Libra Association -Calibra- would be made up of Facebook and 27 other companies such as Uber, Paypal, Spotify, Visa and Vodafone, among others, and their virtual wallet would allow Messenger, Facebook Markeplace, Whatsapp and Instagram to become platforms where they can be performed transactions.
Unlike Bitcoin, where each individual-transaction, independently and anonymously, validates and verifies the calculation, Calibra would be centralized and, in addition, to comply with the law -especially with anti-laundering protocols- will have to retain much of the identification data of the users.
On the other hand, the Libra would be linked to a basket of currencies: dollar, euro and yen, among others. This implies that when an individual delivers, for example, dollars per Libra, Libra reserves increase, and vice versa, when Libra converts for dollars, the reserves decrease. So, the founding members must make an initial capital contribution to constitute that reserve.
In short, more or less regulated, the Libra is – less or more – an advance in the freedom of people, in the real fight against corruption from which politicians benefit and in the efficiency in the management of financial funds.
* Member of the Advisory Board of the Center on Global Prosperity, Oakland, California