Daily Management Review

Facebook cofounder: Libra cryptocurrency is risky


Chris Hughes, one of Facebook founders, believes that with the advent of Libra's cryptocurrency, control over monetary policy will shift from state central banks to private companies.

According to Hughes, a liquid, stable currency will be attractive to many emerging market countries. However, they can start using Facebook cryptocurrency so actively that they prevent national regulators from controlling the money supply.

"What Libra supporters call "decentralization" is actually a transition of power from the central banks of developing countries to transnational corporations, the US Federal Reserve and the European Central Bank," Facebook co-founder believes. He notes that "the less the citizens of a country have rupees or liras," the less authority the regulator has in determining monetary policy, which is especially dangerous during periods of "economic stress."

As an example, Hughes cites the economic crisis in Greece. Then, becoming a member of the Eurozone, Greece lost the opportunity to determine its monetary policy. Libra may make other central banks equally impotent in the face of a recession, the co-founder of Facebook warns.

In addition, he draws attention to the fact that Libra will become the so-called stablecoin (cryptocurrency, the value of which is tied to the currency basket or other assets). Whether a person uses Facebook or not, he can make a deposit in local currency and get cash at any time, Hughes explains.

On June 18, The Wall Street Journal reported that Facebook had officially announced plans to launch its own cryptocurrency Libra. The list of the projec’t member includes payment system operators Visa Inc., Mastercard Inc. and PayPal Holding Inc., as well as Uber Technologies Inc. and a number of other large companies.

Facebook also created a Calibra subsidiary to provide "separation of financial and social data." It is assumed that the Calibra service will provide cryptocurrency operation. A digital wallet will be created on its basis, which will allow paying for online purchases using Libra.

source: ft.com