Libra, a year later: A new lineup, a new hope?
By Edward W. Mandel
As I sit down to write this, almost a year has passed since I first pondered what libra, Facebook’s proposed stablecoin, would mean for IOUX.
“IOU.io sees all this as positive for the IOUX token. Facebook’s sudden interest in having a similar asset on offer does one thing for us that it would take us years to do for ourselves: get our business model in front of a mass market,” I concluded at the time. “We know our place. It’s Mark Zuckerberg’s world and we just live in it. We know we’re not going to eat his lunch. But it was sure nice of him to offer to buy ours for us.”
Earlier this year, I responded to the apparent collapse of the original lineup of crypto exchanges, credit card companies, online wallets, online retailers, personal service providers and charities by suggesting that any or all of them were expendable.
My view in January was, “people can say what they want about libra — I think it’s eventually going to fly. Facebook’s partners can bail for now, but I believe they’ll be back or other, less risk-averse parties will step up.”
And I believe that’s what’s happening now.
In the beginning
Coinbase, America’s leading centralized crypto exchange, was part of the launch and, as for payment processor, both Mastercard and Visa have signed up with libra, as did PayPal, Stripe and PayU. Uber, Lyft, eBay, Spotify and Booking.com were among the retailers that agreed to accept Libra while Kiva or Mercy Corps would accept libra-denominated donations.
It also gets lost in the noise that there’s more to Facebook than, well, Facebook. Sure, it’s the largest social network on the planet with 2.3 billion accounts, but that’s not enough for Mama Zuckerberg’s little boy. It’s also the corporate home of Instagram, the 1 billion-user image-sharing platform that constitutes the third-largest social network. Not for nothing, this behemoth also owns the two largest messaging apps, WhatsApp and FB Messenger, with 1.6 billion and 1.3 billion subscribers respectively. The only social platform with even a comparable reach is YouTube, and the only comparable messenger is Sino-centric WeChat.
So libra would, on Day One, become the in-game currency — if you will — for 6.2 billion social media accounts. Imagine if even one percent of them actually adopted it! That means 62 million people would use it. That’s almost as many people as use the British pound.
Exodus
But that initial optimism didn’t last long. Several factors led to the apparent unraveling of the libra initiative, but the root cause was obvious to anyone who ever went to high school:
Everybody hates the nerd.
Even other nerds, because they’d rather suck up to the cool kids than hang with their own kind.
So the blowback against Mark Zuckerberg was inevitable.
“Regulators should see this as a wake-up call to get serious about the privacy and national security concerns, cybersecurity risks, and trading risks that are posed by cryptocurrencies,” Rep. Maxine Waters (D-Calif.) stated almost immediately. House Financial Services Committee chair added that Facebook “has repeatedly shown a disregard for the protection and careful use of this data.”
The case has been made that Facebook failed to protect user privacy, enabling British political consultancy Cambridge Analytica to harvest data on as many as 87 million users without their permission.
We’ll never know for a fact if that was the edge Donald Trump needed to claim his 2016 Electoral College victory, although it might well have been and Democrats such as Waters are never going to forget that.
But nerd-punching is bipartisan — or at least it is when the Democrats are engaging in it too. It’s pretty much a plank in the Republican platform. And on this issue at least — keeping Zuck from minting his own money — there’s very little daylight between Waters and Rep. Patrick McHenry (R-N.C.), her committee’s ranking GOP member.
This sentiment toward the intellectually gifted and socially inept appears to be universal. You know what the French word for nerd is? Nerd. German? Nerd. Italian? Nerd. In other words, it didn’t take too long for European authorities to pile on the abuse and signal that anyone who made common cause with this particular dork at this particular time was going to be eating lunch alone for the rest of the school year.
The fallout came as swiftly as an atomic wedgie. The currency was announced in June, 2019, but in the four months it took to organize the first meeting of the Libra Association, Booking Holdings, eBay, Mastercard, Visa, Mercado Pago, PayPal and Stripe all bailed. Meantime, Vodaphone joined but left just a couple months later.
Of course, I’m oversimplifying by blaming this on Zuckerberg’s dorkiness. But it was the same my-book-smarts-are-better-than-your-social-smarts arrogance that led to his cavalier attitude toward his creation effect on the culture. On the one hand, I’d probably feel the same way he did if I’d baked up an algorithm that modeled the social habits of billions of human beings who couldn’t count all the money I made off them. On the other hand, damn, it’s easy to understand why unloading on this guy is like catnip to politicians.
Now imagine if space cowboy Jeff Bezos would’ve been first through the gate with his own stablecoin, or Tim Cook, Steve Jobs’s amiable gay sidekick? You think either of those guys would be receiving this kind of swirlie?
Chronicles
No matter how many times you shove a nerd in a gym locker though, he keeps finding a way out.
The fact is, most the original members of the Libra Association stuck with Facebook. The list so far, according to Wikipedia, looks like this:
- Payments: PayU
- Technology and marketplaces: Farfetch, Lyft, Spotify, Uber, Shopify and of course Facebook
- Telecommunications: Iliad SA
- Blockchain: Anchorage, Bison Trails, Coinbase, Xapo
- Nonprofits: Creative Destruction Lab, Kiva, Mercy Corps, Women’s World Banking.
Above all, though, libra continues to have the backing of venture capital through Andreessen Horowitz, Breakthrough Initiatives, Ribbt Capital, Thrive Capital and Union Square Ventures.
And a couple new players have emerged.
Shopify has joined the ranks of libra-supporting, marketplaces. This is a big deal. This ecommerce platform accounts for more than $40 billion per year in gross merchandise volume, which more than plugs the $15 billion-per-year loss of opportunity from Booking, while also diversifying the portfolio of goods and services you can spend libra on. Shopify is no Amazon, nor is it a Walmart, but it’s bigger than just about anyone else you can name. I’m a big fan of these plucky Canadians, and have written about them more than once, most recently here.
And we shouldn’t underestimate the impact of the other call-up, Tagomi. This New York-based firm is often mistakenly referred to as an exchange, which it’s not. Libra doesn’t need an exchange because it’s got Coinbase. Tagomi, rather, is a prime broker for crypto trading. That is, it’s an intermediary that handles margin, lending, shorting, staking and other elements of custody. While I’m more of a decentralized exchange guy myself, that’s not what the Libra Association is shooting for. They want all the AML, KYC and tax reporting procedures locked down around the world. That’s consistent with Coinbase’s model, and it’ll go a long way toward answering regulators’ concerns about have Zuckerberg’s face on money. On my other blog, supporting aforementioned dex BQT.io, I wrote a little about crypto custodians.
Revelation
There are still gaps in the Libra Association’s portfolio. While PayU is a nice-to-have, PayPal would’ve been nicer, especially since it comes with Venmo, the mobile payment app that runs seamlessly through the lives of so many Millennials and Gen Z’ers. As for us geezers, we’d like to know why there’s no ApplePay or GooglePay. For that matter, at least one major credit card company would boost some people’s confidence, especially one that issues cards via banks, because that would also mean that libra is something that could flow through Zelle. While Xapo is bank-ish, it doesn’t really have that capability.
IOU.io, though, is predicated on the belief that these banks and credit card companies are becoming superfluous to the transfer of value. From that perspective, it’s hard for me to be too critical of these gaps. I leave that to TechCrunch’s Josh Constine, who has done a fine job reporting on The Celo Foundation, another stablecoin project backed by many of the same players, minus Facebook. Essentially, they’re hedging that the regulatory scrutiny surrounding Zuckerberg like a cloud of newly activated underarm sweat is the only think holding up libra.
When libra is released into the wild — perhaps this year despite everything that’s going on in crypto and the broader economy and especially in epidemiology — I believe we’ll find that these weaknesses weren’t nearly as dire as many predicted. I can’t see how celo could achieve the instant adoption volume that libra can.
Amazon could, though, and so could Google, and both are reportedly working on their own stablecoin projects. And honestly, first-mover advantage isn’t what it’s cracked up to be. The early bird might get the worm, but the second mouse gets the cheese.
Still, if the Covid-19 scare has demonstrated anything, it’s that brains are once again being respected. Nerds are back, and bullies are getting suspended. Don’t count Zuck out now.
Edward W. Mandel is IOU Ltd.’s strategic advisor for business development. As founder and CEO of both CallMD.com and MDhotline.com, he has helped millions of Americans get immediate access to healthcare. He lives in Miami, and holds both a bachelor’s degree in Computer Science and an MBA from the University of Texas at Dallas.
IOU is a blockchain-based peer-to-peer platform designed to unify ecommerce transaction and customer retention processes, incorporating trade-able IOUs. The platform can be found online at IOU.io and its community on Telegram at https://t.me/IOUCommunity.
