Will Libra make the world ‘libre’?

The greatest paradox of the century…

We’re writing this article to share our thoughts with our friends and community on what we think about the arrival of Libra.

There are 2 reasons to be excited about 2020. The first is the Summer Olympics hosted in the beautiful city of Tokyo, the second is that Facebook is launching their own digital currency, Libra. The big question on our mind is “who will control the world’s financial system by 2050”? Facebook just made things interesting.

Bitcoin offers an alternative financial system, whereas Libra will boost the existing financial system. On the one hand, Libra will help people where it matters most, while on the other hand, it will also make powerful countries and companies ever more powerful.

We recognize that while competition is a good thing, there may reach a point where it will get hard for anyone to really compete.

Libra could change the face of financial services by driving adoption of 2 billion Facebook users towards a global cryptocurrency. Our team is still trying to figure out where Libra falls in the broader spectrum and answer questions such as, “Will Libra succeed at creating a permissionless system?” “What does it mean for Bitcoin, Stellar and Ethereum?” “Will Facebook allow non-custodial wallets or not… and when?”

So let the games begin…

Quick background on Libra

Libra will be run by a Switzerland-based-non-profit consortium called The Libra Association. Facebook will get 1 vote along with all the other members. The Libra Association will start with 27 “founding members” each of whom paid $10mil to process Libra transactions, but Facebook plans to extend that to 100 before going live.

What makes Libra interesting?

• There are no banks or financial institutions in the initial 27 founding members.
• Libra will be a stablecoin backed by a basket of fiat currencies like the dollar, euro, yen and more, instead of being pegged to a single currency.
• Facebook has announced Calibra, the first application that will support the Libra network.
• Regulators seem concerned about Libra, but it seems like over time they will realize that it offers them more control and power. Governments will still win.
• It appears like banks are left out of the picture, but that’s probably not true since they are still best positioned for holding Libra deposits and providing financial services. Banks will still win.

What does this mean for Stellar?

The short answer is we’re still very excited about the future of Stellar. Stellar Development Foundation and the Stellar network is a production ready permissionless and distributed network that is designed for tokenizing any kind of asset. It is a perfect fit for the use cases which Rehive support.

It is going to be interesting to see if Libra succeeds with their plans to move away from a permissioned network in the long run. It would have been cool if Facebook launched Libra on Stellar. Perhaps Google, Amazon or IBM would consider doing that. Who knows.

In 2018 we saw the rise of stablecoins, but this has not really taken off as much as everyone may have thought it would — at least not for mainstream use cases. We do however think that stablecoins will have a greater impact if directly issued by Reserve Banks. There is a fair chance that Libra could replace existing currencies in some countries. Reserve Banks will have to compete and can do so by creating government backed stablecoins. The South African Reserve Bank recently published a tender notice for a digital currency.

What does this mean for Rehive?

Rehive specializes in custodial based white label wallets. We’ve spoken to dozens of banks and retailers across the globe that are all interested in better understanding the technology and business opportunities behind cryptocurrencies. Banks have kept an eye on exploring crypto products, but in most cases decide to protect their brand against any potential ‘scandals’ of price volatility, scams, hacks, fraud and crime that comes with crypto.

Libra does not carry this baggage. We’re expecting banks, retailers, financial service providers and even governments to take a ‘pro Libra’ stance which will be a game changer for the world and for Rehive. Facebook and The Libra Association is legitimizing cryptocurrencies.

We’ve gotten used to things changing rapidly in the crypto space. Our team is doing a fun internal exercise to share our thoughts, opinions and predictions about the financial system, Bitcoin, Stellar and Libra in the coming month. Keep an eye on our blog and Twitter handle (@RehiveHQ) to take part in the discussion.

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