Can the unstoppable force move the immovable object?
Since the dawn of time, innovation is viewed from two different perspectives. One from the perspective of the innovator, and the other from the perspective of the innovation enforcer. With the world moving at such a fast pace, the unwritten rule is: innovate or perish, and in this rat-race, regulators often act as a deterrent rather than a catalyst.
These contrasting entities have been manifested by the clash between Facebook and the global regulatory body. Menlo Park and Capitol Hill have been in a tussle since the social media giant unveiled their digital asset, Libra, primed on ‘banking the unbanked,’ but regulators saw it as a move from a company with untrustworthy history launching a ‘sovereign currency-replacing,’ cryptocurrency that could upend the traditional economic order.
Libra isn’t just an issue for the United States, or simply the western nations, but a regulator concern voiced by countries the world over. Facebook, right from the outset positioned Libra as a global digital asset backed by an array of government fiat currencies and deposits, with no fixed ratio. Further, the cryptocurrency project is not meant to be limited to one country or based on one company’s technology, limiting its outreach, it is truly meant to be global.
According to the digital asset’s whitepaper, the Libra coin will be backed by a “collection of low-volatility assets, including bank deposits and government securities in currencies from stable and reputable central banks.” Facebook argues that the reason a multitude of backers are chosen is to mitigate the likelihood and severity of “fluctuations.” This collateral will comprise of “debt from stable governments,” as a “capital preservation point,” as well as “short-dated securities,” to build “liquidity.”
“This allows the size of the reserve to be easily adjusted as the number of Libra in circulation expands or contracts.”