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‘Major validation’ to ‘catastrophic regression’: How the crypto world reacted to Facebook’s Libra announcement

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On June 18, Facebook unveiled its plans for a new cryptocurrency called Libra which it hopes will reshape finance by changing how people send money and pay for things. It is backed by a host of companies including Visa and PayPal. Here’s how the crypto world reacted to the news.

‘Major validation of cryptocurrencies, will benefit developing countries’

Some were optimistic, others less so. Garrick Hileman, head of research at Blockchain, told CNBC that Libra was a “major validation of cryptocurrencies and blockchain technology to be the financial infrastructure of the future,” and that it had the potential to be “one of the most significant and positive events” in the history of cryptocurrencies as “billions of Facebook users could join the ecosystem we’ve been building over the last decade”. There was also broad agreement that Libra could benefit users in developing countries. Tony Perkins, editor of Cryptonite, told CNBC that by giving users the ability to transfer funds to one another, and to merchants at a low cost, Libra would bring billions of people into the modern economy, and “represents a gigantic economic opportunity like we have never seen”.

‘Not a pure cryptocurrency; don’t expect privacy’

Bitcoin advocate Erik Voorhees tweeted: “Zoom out for a second and realise how far this industry has come. The biggest companies in the world are now launching cryptocurrencies. BOOM.”

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He then went to talk about Libra’s privacy issues:

  • “Libra is clearly not a ‘pure cryptocurrency’. Nobody should expect privacy by using it. Nobody should expect the true borderless standard of most cryptos. Libra will never be available in Iran due to sanctions, for example.”
  • “The governing consortium can explicitly block/prevent [transactions]. You won’t find unstoppable finance here. Again, in this, traditional cryptos are far superior. But let’s be realistic, there’s no way FB could create an unstoppable coin (at least, not in its 1st phase …)”.

He also criticised the move to pin Libra to a basket of traditional, fiat (government-issued) currencies and bonds, in the form of Libra Reserve, saying, “Over the long term, any currency based on fiat will fail relative to hard assets (Bitcoin, gold, etc.) Politicians debase currency as their modus operandi, and thus if Libra maintains fiat backing it tend toward zero long term [sic]. BTC and ‘real’ cryptos will crush it long term.”

Questions about Libra Reserve and Libra Association

Jerry Brito, executive director at the research non-profit CoinCenter, raised important questions about the Libra Reserve and how the companies that fund it will be chosen. He said that based on the specified criteria (more than $1 billion market value, a reach of at least 20 million people globally, and recognised as a top-100 industry leader by a third party), companies such as Huawei and Gazprombank might qualify.

https://twitter.com/jerrybrito/status/1140909189000257536

He also raised doubts about the plan to make the Libra Blockchain permissionless, saying that while he didn’t doubt the sincerity of the sentiment, there seems to be no mechanism in place to ensure this — and resist the urge to keep it permissioned — if Libra becomes wildly popular and profitable.

‘Catastrophic regression’

Matthew Green, who teaches cryptography at Johns Hopkins University, was firmly among the pessimists, writing: “I don’t think it’s possible to express what a catastrophic regression this thing is going to be. Say what you want about Visa and the legacy banks, they don’t broadcast your transaction details to the world.”

‘Power grab by tech companies’

Others, including applied cryptography consultant Peter Todd, talked about the threat that Libra poses to governments and the global financial ecosystem.

Andreas Antonopoulos, author of three books on cryptocurrency including Mastering Bitcoin: Unlocking Digital Cryptocurrencies, said that while Libra doesn’t compete against any open, public, permissionless, borderless, neutral, censorship-resistant blockchains, it will compete against both retail banks and central banks.

His views were echoed by AngelList co-founder and Naval Ravikant who told Yahoo Finance that Facebook’s announcement was more of a competitive answer to WeChat and Alipay than a threat to the crypto industry. He said that while Libra could lower the cost of global payments, “I struggle to see why it needs to be on a blockchain other than for PR or marketing.”

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