A columnist for The Wall Street Journal (WSJ) recently spoke about the upcoming Facebook cryptocurrency, Libra. According to the article, the columnist opines that the proposed stablecoin isn’t as promising as projected and added that Libra gives Facebook the “license to print money.”
Libra Will Become a Private Central Bank
Recently, U.S. Congresswoman, Maxine Walters, called for Facebook to halt further plans until regulators have carried out thorough investigations. Europe is also seeking tighter regulations following the release of the Libra whitepaper.
James Mackintosh, a Senior Markets Columnist at The Wall Street Journal, also voiced his opinions concerning the Facebook stablecoin. According to Mackintosh, the fact that Libra is pegged to several reserves to provide stability doesn’t mean those holders are wholly protected.
Buttressing this point, the columnist said:
“Like a money-market fund Libra has no capital and no deposit insurance, so any drop in the value of the reserves should mean the value of Libra falls. Losses from fraud, mismanagement or default within the reserve fall on Libra holders, unlike with a normal bank account or bank note.”
The Libra project appears to be a private central bank – one that could see its backers earning interests on the deposits held by potentially billions of users around the world.
Think of the U.S. Federal Reserve but on a more global scale. This is all the truer if one follows the assumption that the project could see massive penetration within traditionally underbanked communities given Facebook’s social media pedigree alone.
Although Libra has the potential to reach a global audience, the columnist states that this wouldn’t guarantee the stablecoin’s success.