Facebook Inc. is once again defending Libra -- this time against fears that the envisioned cryptocurrency could replace sovereign currencies from the U.S. dollar to the Euro and threaten central banks’ control over money creation.
David Marcus, the executive leading the project, posted a series of tweets the same day members of the Libra Association met with regulators convened by a G-7 working group in Switzerland. He argued that creating Libra isn’t the digital equivalent of printing U.S. dollars or minting new euros. The simple existence of Libra, he says, doesn’t create new value.
Facebook’s crypto plans, unveiled in June, have faced intense push-back from regulators all over the world. One of the biggest concerns is that the new digital currency will be used by smugglers, drug dealers and terrorists. Another is that the social media giant, which has run afoul of regulators over user data in the past, should not be trusted to handle sensitive financial information. Facebook has said repeatedly it would be just one of many companies managing the new currency.
“Recently there’s been a lot of talk about how Libra could threaten the sovereignty of nations when it comes to money,” Marcus tweeted. “Libra will be backed 1:1 by a basket of strong currencies. This means that for any unit of Libra to exist, there must be the equivalent value in its reserve,” he tweeted. “As such there’s no new money creation, which will strictly remain the province of sovereign nations.”
7/ We will continue to engage with Central Banks, Regulators, and lawmakers to ensure we address their concerns through Libra's design and operations.
— David Marcus (@davidmarcus) September 16, 2019
Currency competition is yet another sticking point for wary regulators.
In a follow-up call after Marcus’s tweets, Christian Catalini, the lead economist inside Facebook working on Libra, declined to say whether or not the issue came up during Monday’s meeting. But he did say that this element of Libra is one of many that are “misunderstood or not correctly interpreted.”
“All of the design of Libra is really around being a complement of fiat [currencies], not a substitute,” he said.
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Libra does not yet exist, and Facebook has pledged that it will not launch until regulators are appeased. It hopes to start the currency sometime in 2020.