The real reason Uncle Sam is afraid of Libra

A lot of column inches have been devoted to Facebook’s Libra coin so far, and we can expect many more to come. The tech giant’s stablecoin has put the wind up Uncle Sam, and a few other countries as well, but with the USA being the home of Facebook, its reaction is the one that most observers are following.

And here’s an amazing fact to consider: Facebook has 2.5 billion ‘citizens’ and the USA has 350 million users, as Clem Chambers, a senior Forbes contributor points out. . This Chambers claims is the root of the fear of Libra.

Who needs the dollar?

What the US government and others fear is that Libra will usurp their sovereign currency. This is particularly important to America, because it exports its dollar as a way of maintaining solvency. If other countries didn’t look to the dollar as a ‘safety net currency, what would happen? Clearly, the US government has been asking itself that question, then asked David Marcus for some answers. None of which seemed to reassure them.

As Chambers says in his article, “bad things would happen to the US status as a reserve currency …if the 2.5 billion Facebook users started to use libra, a basket of currency linked money.” The USA is sitting on a debt mountain, so any threat to the value of the dollar is an issue of mega proportions. As Chambers warns, “If a new private sector money is created and made available instantaneously to 2,500 million people a lot of unpredictable things will happen.”

Disrupting the retail sector

He has been working on a site that has developed its own crypto ‘Plus1’ for social media validation, and he suggests it provides us with a laboratory of sorts, where we can see the possible outcomes for Libra. Chambers’ site has around 3 million site users a month, so it’s a very scaled down version of Facebook. But the use of a ‘native’ cryptocurrency is working very effectively, despite some slowness in uptake.

He says his first two observations are: “crypto works within an online community, and crypto takes a goodly time to permeate into usage.” So adoption takes a while, but it does happen. His data also shows what we already know from other social media usage: older users are less likely to engage with what he calls “new-fangled stuff,” but “mature members” do engage with it quite quickly. By contrast, “The young’uns however, are all over crypto like butterflies on summer lilac.” Chambers says this age dynamic makes adoption slower than most might think.

Furthermore, Chambers says that while you can buy things with crypto, this has been slow to happen. He suggests Facebook’s Libra should be the coin that changes this and acts as a major disruptor in the retail arena.

Libra may also lower the barrier to entry for consumers. Using and owning crypto at the moment is not simple enough to have a broad appeal, but again Libra could change that.

Furthermore, just the fact you can transfer fiat in and out of Facebook creates a massive bank. Will we have ‘Facebank’ in the future? I’d say it’s pretty likely.

And, as Chambers remarks, the lawmakers are completely focused on privacy issues with Libra, whereas what they should be looking at is “the techno-political structure over issuance and control of Libra’s proposed ownership and business model.”

Libra is just the beginning: in the future expect to see similar coins from Google, Amazon and Apple. And there will be others. Who will need the dollar, the yen, the euro and other currencies then? That is what governments really fear.

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