Cryptocurrencies Have Already Deleted Government’s Monopoly On Money Creation
By Melis on Altcoin Academy
For readers who haven’t been following the story, some context might be helpful. Facebook’s “cryptocurrency”, Libra, is a stablecoin — a cryptocurrency that is pegged to an existing asset. In this case, Libra will be backed by a basket of international currencies. Libra will be governed by the Libra Association — a group of 27 companies and Facebook. Facebook claims this will allow the currency to be governed in an open and transparent way and that it won’t give one company too much influence over Libra.
Given that Libra will be a stablecoin, it will have low volatility. That will be attractive in countries without a stable currency, like Venezuela and Argentina. Stablecoins are also attractive for use in daily purchases. After all, who wants to use a currency that might fluctuate 10% a day? It is very difficult to budget for daily necessities when there are high levels of volatility.
That means Libra could be used for small-value payments and as a store of value in certain markets. With Facebook’s global user base of 2.38 billion, it won’t take long for the coin to gain adoption. So why, then, are government officials taking aim at Libra?
The usual line is that Libra would be used to finance terrorism or other illicit activity. This critique isn’t unique to Libra. Bitcoin’s critics have been saying this for years.
This year, cryptocurrency users will spend $1 billion worth of bitcoins on the dark web for illicit purposes. That’s going by a report from blockchain analysis company Chainalysis. The dark web is a hidden part of the internet that you can’t get to with normal web browsers. You need specific software to find it. And as you likely know, the dark web includes online markets for drugs and other illicit goods. So, there will be $1 billion in bitcoin spending on illicit goods this year. That will surpass the previous high of $872 million in 2017… which corresponded with bitcoin’s run-up to $20,000 in price.
But guess what? $1 billion in a year is next to nothing in the big picture.
There’s a widespread perception that users use bitcoin primarily for illicit purposes. But nothing could be further from the truth. For one, $30 billion worth of bitcoins trades on legal digital-asset exchanges every day. And remember, these exchanges verify the identities of all users. So that’s 30 times more legal bitcoin activity in a single day than illegal bitcoin activity in a year.
But even bigger, a report from Global Financial Integrity estimates that up to $652 billion is spent on drugs every year. What’s more, up to $1.1 trillion is spent on counterfeit and pirated goods. Those transactions are in fiat currency… With U.S. dollars making up the biggest portion.
That means bitcoin use makes up just 0.15% of illegal drug transactions each year. And if we include counterfeit goods, bitcoin use makes up less than .06% of all illicit transactions. It’s a drop in the bucket.
So if the concern over Libra isn’t about money laundering, what is it?
Facebook has a user base of 2.38 billion people. That’s roughly 32% of the global population. With 2.38 billion people connected to its network, Libra would certainly gain immediate adoption. That would create a multibillion-dollar business for Facebook overnight, thanks to transaction fees. But it would also accomplish something else…
Remember, Libra will be backed by a basket of currencies. It will be relatively stable. It will also be completely fungible. In other words, users will be able to convert Libra into other digital assets, like bitcoin… or convert assets back into U.S. dollars, yen, pounds, euros, and so forth. Combine that with Facebook’s 2.38-billion-person user base, and Libra could become a global reserve currency practically overnight. It could rival currencies like the pound, the euro, and yes, even the U.S. dollar.
Literally, this will be a global reserve currency, effectively controlled by one corporation (or group of corporations ), that is more transferable, more fungible, more secure, and more divisible than any fiat currency on earth.
Do you see why the U.S. government might be a little wary of Facebook’s Libra? “Cryptocurrencies” like Libra could directly threaten the government’s monopoly on currency creation.
Digital assets are here to stay. There’s no putting this genie back in the bottle. The technology has already been released to the public. And if America doesn’t want to get left behind, it needs to embrace blockchain technology, not hide from it.
The currency revolution isn’t years away.
It’s already started.