The Libra Association seems to be haemorrhaging members, is this proof of the Libra being doomed to fail or just my own confirmation bias?
I’ve written about Facebook’s cryptocurrency Libra before, and I argued that it wouldn’t be allowed in any state powerful enough to stop it, as it would be an affront to any state’s sovereignty to allow a currency controlled by a private association be in wide-spread circulation in their territory. I figured that the Libra would face regulatory problems which would force it to abandon plans of launching in the US, EU, China, Japan and other major economies. While there have been problems with regulators for Libra it seems the major threat it faces is that its backers are pulling out.
The Libra is supposed to be headed by the Libra Association which was made up of 28 large private companies including Paypal, Visa, Ebay and of course Facebook. My guess as to why Facebook decided to share control of the Libra with others is to make the Libra seem more accountable. Since the project was announced in June 2019 eight of the 28 members of the Libra association have left the association, the latest one being Vodafone just this week. As for exactly why Vodafone and the others left they mostly gave vague statements about focusing on other things at the moment but it is reasonable to guess that the real motivation for leaving is that these companies expect that the Libra won’t be allowed to launch. Any time and effort spent in developing it will be wasted if say the EU decides to ban it as I believe it is likely to do, although it will most likely not going be so clear cut as an outright ban.
As I wrote in my last piece on the Libra, I think the only chance of the Libra being a success would be if the association would focus on middle-income countries instead of the rich world. In many parts of the developing world governments are inefficient and corrupt, and in that context the Libra might seem more reliable and safer than the domestic currency. But in the rich world where governments are more effective and less corrupt and large firms are blamed for lots of social problems, the main one of course being climate change, the current political mood is unsuited to a privately managed currency. Even if, and that’s a big if, the Libra gets approved by regulators the public might not be all that interested in it in the rich world.
What do you think? Is the Libra doomed or is this a blatant case of confirmation bias on my part? I’d love to hear your thoughts on the matter! If you liked this post you can read last weeks post on the phase one trade deal between the US and China here. Please share this post with a friend or co-worker who might find it interesting, and come back for a new blog post!
Written by Karl Johansson
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