Next week, U.S. Senate will hold a hearing on Libra, Facebook’s new cryptocurrency.
As a former U.S. Congressional aide, I’m not interested in the actual hearing itself. That’s simply political theater, a chance for members to show off in front of a TV-watching public. They need this hearing to show the world they will keep tabs on huge, evil companies like Facebook. Or at least use it as an excuse to flip Facebook the middle finger.
No, I’m interested to see how Facebook and its partners push their agenda through Congress.
As I wrote for CCN, Facebook’s Crypto Libra is a Huge Deal – Just Not for the Reason You Think. It’s uncharted territory and Congress can no longer ignore it.
You may think the hearing itself is a sham, but it will raise some very important issues. Libra is a bold, controversial product that raises questions about privacy, money, commerce, government sovereignty, online interactions, free speech, property rights, and financial justice.
But . . .
Can’t you say the same thing about bitcoin?
Why fuss about Libra but not bitcoin?
Congress has held three hearings on Facebook this year alone.
It hasn’t held a hearing on Bitcoin for two years.
And it has never held a hearing about any of the many other U.S.-based businesses that have created their own cryptocurrency—e.g., JP Morgan, Factom, Metal, and plenty of others.
Those cryptos actually exist. Libra does not (yet).
Why did Congress go ballistic over Libra but not any other cryptocurrency?
Four reasons: size, scope, status, and structure.
Bigger than bitcoin
Facebook plans to embed Libra into Facebook, Instagram, WhatsApp, and every other businesses it acquires in the future.
Straight away, 2.3 billion people will have Libra literally at their fingertips—way, way more than the 35 million or so who own bitcoin.
Does this mean people will buy Libra and use it?
We shall see.
If they do, Libra has the potential to grow bigger and more powerful than the dollar, euro, and yen . . . combined.
Broad in scope
Facebook plans to install Libra ATMs all over the world. It also plans to create merchant systems where people can trade cash for Libra. On top of that, it will offer a separate mobile wallet for usage outside of Facebook’s platforms. And, it will have its own programming language and smart contracts.
Libra’s founding members include large, global corporations across many industries. Visa, Mastercard, telecom companies, payment service providers, Uber, eBay, blockchain businesses, streaming services, and financial nonprofits joined the group.
Even PayPal’s on board, even though Libra’s success will kill their business.
No cryptocurrency has such an extensive network and infrastructure, not even bitcoin.
Also, none of them have the support of so many major businesses.
Obviously, Facebook is a much bigger part of people’s lives than bitcoin. Almost nobody uses bitcoin, almost everybody uses Facebook.
Congress will never make time for obscure projects like Tierion or MakerDAO, but screwing with Mark Zuckerberg in front of the cameras? The only question is how soon they can get him on the witness stand.
Facebook has acquired a certain status. Some see it as the corporate elite while others think it represents all that’s wrong with the tech industry, but no one can dispute its relevance.
It even has its own letter in the most popular, best-performing stock index (it’s the F in FAANG).
We know Facebook is a big deal. Why shouldn’t its cryptocurrency be, too?
Libra is not decentralized at all, which Facebook admits. It’s also permissioned—you have to pay to run a node.
As a result, Facebook and its partners control Libra and its development. They can change the rules any time they want.
Even that separate, private wallet doesn’t protect you if Facebook decides to change Libra’s programming. With Libra, you will always have to use whatever version of Libra Facebook tells you to use. Facebook controls your money.
By contrast, you never have this worry with bitcoin. All the rules are baked into the programming, impossible for any one person to change.
Facebook says it will decentralize within five years after it launches Libra, but it doesn’t explain how that will work.
Will anybody care? Most people do not think about this when they use money.
But the ambiguity touches on some interesting points that do not matter for other cryptocurrencies. Bitcoin has no central bank. Libra does.
Better than your government’s money?
Of course, it’s hard to overstate the significance of Libra.
A global company plans to issue its own currency for use by one-third of the world’s population. It will create a massive financial system around this currency using ATMs, mobile phones, private wallets, and smart contracts—totally separate from any sovereign government.
What happens if people trust Facebook more than their own government? When a single company holds more power than the largest, strongest countries in the world?
Like the fictional government in my book, Consensusland, the U.S. government needs confront a new reality:
Anybody can create money that’s better than ours.
For too long, cryptocurrency came from kids or computer geeks banging out code in their parents’ basements. Or maybe a few smart guys with wacky ideas that would never work in the “real world.”
That made it easy for Congress to dismiss it as a fringe technology for criminals, terrorists, and cyber nerds.
With Facebook getting into the game, they can no longer do so.
That makes all the difference.
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Mark Helfman is a cryptocurrency commentator and author of Consensusland, a Readers’ Favorite 5-star book about a country that runs on cryptocurrency.