Dean Armstrong QC, Head of Cyber at 36 Commercial and one of the UK's leading authorities on cyber law & crypto comments on the Facebook Libra Coin
In the middle of June 2019, Facebook announced that it would launching, probably sometime in 2020, a new crypto coin, the Libra Coin. It was a departure from other crypto initiatives in that the stated object was to launch a new global currency which would ultimately be used, via a standalone App, to purchase goods and services via Facebook, Facebook Messenger, and WhatsApp. It is anticipated that it will be fully backed by a combination of bank deposits and treasuries from high ranking central banks. It is also said to have the backing of the Visa and Mastercard payment networks as well as Uber and eBay.
The initial opinion is that Libra Coin will be more like Ethereum and Ripple than bitcoin. It is supposedly being underpinned by a private blockchain. The plan is that a trusted private network of 100 companies will be responsible for posting transactions without the need for an independent validation system.
Proponents of the initiative state that the new “coin” will not create any new money but the backing fiat currency would act as a reserve, allowing the digital partner to be used on the internet with the resulting fall in transaction services.
It is impossible, given the relative little that is, at the the time of writing, known about this new initiative but, the potential disruption, appears to be enormous. Whist corporates have issued forms of coin before, JP Morgan or JPM Coin, being one example, this appears to be different in two significant ways. First, this, apparently, has a stated aim of being a global currency, ie being used as a medium of exchange. Second, because it is being effectively backed by Facebook, its power and ability to make a large impact on traditional markets, should not be underestimated.
Already there has been some disquiet at the news. Campaigners argue that, as well as the potential issues for the financial markets, issues over sharing of data across services may arise. However, its supporters point to the advantages of the new coin when used in association with Calibra, the payment service to be launched on the Libra Blockchain in terms of opening more opportunities for online commerce and the scope for using for micropayments and the attendant benefits in paying for digital content. Add to this the proposed use of smart contracts and a real crypto/digital currency revolution may be just beginning...