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Libra Coin: The Good, The Bad and The Unknown

Originally published at https://ckogan.com

Credit: https://www.ft.com

Positive key takeaways you need to know about Facebook Libra project and its “crypto” initiative

  1. Perhaps, the most interesting speculation surrounding Facebook’s blockchain power play is that it is inevitable that the proliferation of Libra would rub off on the crypto market. With the Facebook ecosystem already boasting a whopping 2,4 billion users, there is no doubt that the global reach of this initiative will set the likes of bitcoin up for blistering adoption.
  2. The same cannot be said of fiat currencies, which experts suggest will experience a drop in valuation. As such, in the next 3 to 10 years, central banks and financial powerhouses have no other choice but to join the blockchain bandwagon, else they phase out.
  3. Libra blockchain initiative will go toe to toe with Ethereum, which is currently the largest blockchain app hub. This notion is even truer considering Facebook’s past successes in open source development. Joe Lubin (Co-Founder of Ethereum) didn’t express a lot of optimism on this matter dubbing Libra as a “…centralized wolf in decentralized sheep’s clothing”.
  4. Another implication is the economic power it avails Facebook. Apparently, Mark Zuckerberg will emerge as the head of one of the biggest financial platforms we have ever seen, and its headquarter is in Switzerland. While some have aired their reservations concerning the tech giant’s growing dominance, others believe that its emergence as a payment processor will correct its apparent liabilities.
  5. It is probable that issues relating to political manipulation, fake accounts, and privacy that had at one time or the other plagued Facebook’s credibility will come to an end since it has to conform with strict Anti Money Laundering (AML) and Know Your Customer (KYC) policies.
  6. Many of the corporations listed as members of the Swiss Foundation (Calibra) that will govern the operations of Libra are mostly established tech companies. For a project tagged the biggest payment solution by a mile, it is surprising that there are no traditional financial institutions taking central roles. This revelation establishes a burgeoning fact that the tech industry has begun to claim a controlling stake in the global financial market.
Credit: https://www.nytimes.com
Credit: https://twitter.com/WhalePanda/status/1140919326960230400

Cryptocurrency vs Stable Coin?

From what I have noticed so far, many do not only convince Libra to a cryptocurrency, some have even begun to compare it to stablecoin (a coin pegged to a single traditional asset, such as Tether). However, as revealed in Binance’s in-depth research on the true nature of Libra and JPM’s Quorum, its apparent reliance on more than one asset excludes it from the stable coin nomenclature.

Reality check behind Facebook Libra

On June 11, Andreas M. Antonopoulos, a well-known crypto supporter, tailored some critical issues regarding the possibility of Facebook’s initiative crippling the crypto market on his YouTube channel.

  1. On the other hand, Bitcoin is an open blockchain network, which dissociates its operations from bureaucratic governance.

“Libra is NOT a blockchain in the traditional sense since it is lacking most, if not all necessary attributes; it has to be open, public, censorship-resistant, immutable, neutral, etc. which Libra is not, based on the whitepaper.”

3. In the aftermath of recent political manipulation scandals (especially, the Cambridge Analytica scandal), Facebook has beefed up its privacy and security systems by restricting APIs and scrutinizing suspicious new developers. One would expect that the same level of scrutiny will go into the Libra project. As such, apps and exchanges supporting the coin will undergo the sort of checks that would seem alien to the crypto community at first.

“There are no plans for the Libra Association to take a role in actively vetting [developers],… The minute that you start limiting it is the minute you start walking back to the system you have today with a closed ecosystem and a smaller number of competitors, and you start to see fees rise.”

In my humble opinion, a comment like this suggests that Facebook is yet to realize the atrocious implications of either a privacy or security breach on a centralized and regulated payment platform.

The Crypto Community Doesn’t Trust Libra Over Banks

In what seems like the ultimate statement of the community, the overwhelming majority of users have clearly stated that they won’t even trust Libra over traditional banks.

First reactions from the regulators

There was no shortage of reactions, particularly on the part of regulators, following the Facebook official introduction of its brainchild. In the U.S., ex-chairman of the Commodity Futures Trading Commission (CFTC), Timothy Massad, stated,

“The thing we may see from Congress is really pressing [Facebook] on what is really your purpose here? What is your use case?” Massad went on the major talking point the U.S. Congress will focus on as he asked, “Is Callibra a bank, and therefore, is Facebook a bank holding company?”

Likewise, the Financial Market Supervisory Authority in Switzerland has reportedly contacted the Swiss Foundation in charge of the project for more clarification. It is expected the information garnered will inform the watchdog on the compliance responsibilities of the foundation and whether its operations fall under the regulatory jurisdiction of the Swiss supervisory law.

What Are Its True Implications?

  1. However, I could not help but notice that these arguments contradict the important detail that Antonopoulos revealed as the bedrock of open blockchains. It is clear that Bitcoin’s main selling point is it’s borderless, uncensored, cheap, and open nature. Facebook coin, on the other hand, relies on the inputs of selected corporations who will pay $10 million for these privileges, as per reports. And so, financial policies and regulations are very much going to determine their actions or inactions.
  2. For example, a US based company like Facebook with central authority over a payment network with ties with the US dollar would technically be facilitating illegal transactions if it is available to countries under US sanctions. This assertion implies that GlobalCoin is anything but borderless and censorship-resistant.
  3. Their sole motivation is making money in an attempt to reinvent the old fashioned invasive ad business model. And from what I have learned from the data brouhaha that has shrouded the operations of Facebook over the years, it is difficult to believe that these corporations would become philanthropic just because media platforms or the public are pushing for it.


Lastly, it is easy to see why many analysts believe that Libra would drive the next phase of bitcoin adoption.

Credit: www.reddit.com

“Facebook probably has a hundred times more users than the cryptocurrency industry combined today. The Facebook project will educate a lot of people about cryptocurrency. Regardless of the criticisms targeted at the company, I believe this is good for the industry in the long run.”

Beyond the hype, it’s important to understand the difference between decentralized and centralized networks, the ability to access your money without someone’s permission, at the same time having security and transparency. My biggest disappointment with the Libra project is that it failed to introduce the concept of Universal Basic Income (UBI) which is all about practical wealth equality. Instead, Facebook is looking to create another Swiss Bank (just private) mimicking the value proposition behind blockchain.



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Constantin Kogan

Dad, entrepreneur, angel investor, meta-connector. Researching and contributing to the sharing and value economies 🚀