Benjamin Tsai
Jul 24, 2019 · 6 min read
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“The Great Wave (off Kanagawa)” is a famous woodblock print by Hokusai from early 1800’s. I have an actual print from Japan hanging in my office, and it’s an unofficial logo for our asset management firm, Wave Financial. There are many interpretations, but one of which is Impending Change, which I feel is coming to the financial world with the advent of blockchain technology and crypto currencies.

Recently, I have been interviewed and quoted with regards to Facebook and the Libra Association/Token. The articles and interviews are attached at the bottom. It is great to see mainstream attention that blockchain technology and crypto currency are getting right now, and I believe the public discussion is positive regardless of outcome. None of the quotes or interviews go into enough depth, so I have decided to share my thoughts on the project:

1. I feel that Libra can be launched in the same regulatory environment that other tokens are launched in, namely USDC/GUSD/PAXO. These are stable coins issued by a regulated entity, with full AML/KYC at the on/off ramp (when converting from and to fiat). Of course, this assumes the Libra Association will have a license of some sort, or have a partner that has the license. I believe that pegging to 4 currencies instead of 1 should actually be preferred, as it becomes a global standard, not just a US one. This is not an ETF, or a security in general, as it can be considered a currency, under banking rules (with exemption to securities regulations). Due the structure of stable coins, it would be difficult to pay a dividend, as a fresh check of AML/KYC at every payment would be needed. (I am not a lawyer, so these are my interpretations after hours of discussion with legal professionals around the world.)

2. The Libra Investment Tokens are securities, and would fall under SEC rules. These can be issued under Reg D/S to a small number of investors, so I doubt that is an issue at all. In this structure, ownership is always tracked (as a cap table) so dividends can be paid normally.

3. Here is my guess of the cashflow. People will buy Libra with fiat. The Libra Association will hold the fiat in 4 currencies, generating some yield (weight not announced, so averaging maybe 1% per annum?) across the holdings. That goes to the Libra Association. First to be paid would be expenses associated with Libra Association, such as salary, rent, etc. Second, some economics will be passed to the Node Validators, which will include all the partners that run a node. This is to cover costs and incentivize them to continue operating the network/hardware. The amount of payout is unclear now. Third, the remainder can be paid out as dividends to the holders of the Libra Investment Token, which are going to be the partners that pay $10m up front.

4. In terms of governance, the Libra Association will have over 100 members at some point, with a portion of them being paying members and holders of the Libra Investment Token. For non-profits that are allowed to join, I assume they will not get Libra Investment Tokens, but will have voting rights. I assume all members will have the same percentage of voting rights. Facebook has promised to exert no more than 1% voting control at Libra Association once it is set up.

5. For Facebook, they have also set up a subsidiary called Calibra which will be creating a Libra wallet that is compatible with Facebook, Instagram, WhatsApp, and other Facebook group platforms. They have said that these FB platforms will only accept Calibra, and not external wallets, which I believe is fair.

6. At a micro level, I believe that the biggest point for governments to regulate is to make sure that Calibra does not get preferential treatment to the access and management of Libra. (This is the opposite direction as point #5. Calibra and all other companies should be able to access Libra fairly, while Facebook, as a private organization should be allowed to limit wallet access to their platform.) If there is no preferential treatment, then Facebook is competing with everyone else that wants to use Libra fairly, while maintaining their advantage of a larger network of clients. This type of limitation should apply to anyone else (JP Morgan, Amazon, Apple, etc.) that wants to create a currency. The details of this “no preferential treatment” would need to be worked out, with enough room to account for unexpected realities after implementation.

7. At a macro level, there is a fundamental and philosophical discussion on whether the government should allow the creation of a currency that may affect its power to regulate an economy. Assuming mass adoption of Libra, any country that is not included in the currency basket could potentially have reduced if not limited powers to regulate their own economy. This is similar to the US dollar becoming default currency for some emerging markets around the world, even when some of those governments ban the use of US dollar locally.

8. To extend the last point even further, there is a possibility that this creates a separation of State and economic policy setting. This is similar to the separation of Church and State, a familiar concept in the US, but not necessarily in other parts of the world. The Libra coin (or some other international corporate currency) may potentially separate the State and the economic policy setting, so that economic policies are driven by economics, rather than politics. Of course, I doubt countries would give up the power to tax and spend, but it creates the possibility of a more independent banking system not relying on government direction/intervention. The impact would require more thought, analysis, and debate, but my point being that an international corporate currency creates the possibility. (As a side note, Mark Zuckerberg, the CEO of Facebook, holds 60% of the voting rights of the company himself, and another 10% with insiders. This side note may make the discussion of an “independent” banking system a bit harder to digest.)

9. Finally, the fact that Libra comes from Facebook is an extra burden that gets mixed up in the discussion above. With that said, there are people from the recent Congress FB Libra hearing that sees the reality of crypto currencies in general. Here is a quote from Patrick McHenry in his opening statement on July 17, 2019 (day 2 of hearing).

“Change is here. Digital Currencies Exist. Blockchain Technology is real. And Facebook’s entry in this new world is just confirmation, albeit at scale. The world that Satoshi Nakamoto, author of the Bitcoin white paper, envisioned and others are building, is an unstoppable force. We should not attempt to deter this innovation, and governments cannot stop this innovation, and those that have tried have already failed.”

10. Other corporates will launch their own version also. JP Morgan has already announced they were doing a coin before Facebook, with no objection letter from Congress. Mitsubishi and Sumitomo have all spoken about issuing a JPY coin. I would not be surprised if Amazon steps in with something, since they support blockchain technology on AWS. Google? Apple? Other international players all will want to get involved also.

These are my thoughts at this point. I am excited to see how things turn out in the next 12–24 months. Regardless of outcome, Impending Change is coming.

The Street


Bay Area TV (KTVU) Interview #1


Bay Area TV (KTVU) Interview #2


This informational piece is intended to inform Wave Financial’s audience of the current status of the crypto industry. Nothing in this material should be interpreted as an offer or recommendation to buy, sell or hold any security or other financial product. Wave Financial LLC is a registered investment adviser, registered with the state of California. Registration with the state authority does not imply a certain level of skill or training. Additional information including important disclosures about Wave Financial LLC also is available on the SEC’s website at Or, learn more information about Wave Financial at

Mr. Tsai is the President and Managing Partner at Wave Financial. The views expressed in this report reflect Mr. Tsai’s personal views about the subject companies, platforms, issuers, security and non-security investments (“investments”) and not those of Wave Financial. Mr. Tsai’s comments are not intended to be construed as recommendations or an offer to buy, sell or hold any investment. Mr. Tsai’s compensation is not directly or indirectly related to the specific recommendations or views contained in the research report. The ecosystem landscape included in this post is intended to provide generalized guidance; nothing in this analysis is intended as investment advice, a recommendation or an introduction to particular funding or capital resource.

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