From Crypto Winter to Crypto Future
Silicon Valley’s cryptocurrency of the future.
In June of 2019, Facebook dropped a bombshell.
Rumors had swirled for months that the social network was going to launch a cryptocurrency, but the company’s plans, dubbed Project Libra, turned out to be bigger and more ambitious than many had imagined. Libra, its new currency, would be pegged to a basket of global currencies–including dollars, euros, and Swiss francs–and available to Facebook users around the world. This meant that anyone who used Facebook, or one of the company’s other products like Instagram or WhatsApp, would have easy access to the new currency.
Even more remarkable was that Facebook had assembled a coalition of A-list brands in finance and technology as partners, including Visa, Mastercard, Uber, Spotify, and eBay. Facebook’s master plan called for its partners to help maintain dozens of blockchain nodes that would create a transaction ledger for Libra, and to contribute to the reserve fund that would back the Libra with hard currency.
The partner list included two companies that specialized in storing cryptocurrency, and it also included Coinbase. There already was a link between Facebook and Coinbase: the head of Project Libra was David Marcus, a former president of PayPal who, until recently, had been on Coinbase’s board of directors. But while Silicon Valley gossips have speculated for years that Facebook has tried to acquire Coinbase, the rumors are false–Facebook never even inquired, and Brian Armstrong [Coinbase’s CEO] and Mark Zuckerberg have never met.
When it came to Project Libra, the plan was for Coinbase to be just one of a hundred or so partners to help Facebook run the new blockchain network–if it ever got off the ground in the first place. Unfortunately for Facebook, by the time it announced Libra, the company had become radioactive to Congress and regulators around the world. The social network was already the subject of numerous antitrust investigations, and for many governments, the prospect of Facebook controlling a global supply of money was beyond the pale. Meanwhile, some of Facebook’s high-profile partners, including Visa and PayPal, became skittish of the political heat and bolted the consortium.
The Libra plan wasn’t just a political minefield–some feared it was also an economic one. Katharina Pistor, a professor at Columbia Law School, told Fortune magazine that Libra could destabilize the exchange rate in developing economies like Kenya if currency traders used Facebook’s money instead of the local currency. Others likened Libra to a gambit by a handful of companies to privatize the money supply. A few suggested it was tantamount to outright treason. “If Facebook raised an army, this would be only slightly more hostile to the people of the United States than what is currently proposed,” declared Preston Byrne, an outspoken cryptocurrency lawyer.
Critics raised many valid questions, and, as of the time of this that Silicon Valley is still able to dream up grand and world-changing technologies–whether or not the rest of the world wants to embrace them. It also shows that those technologies are likely to disrupt global finance.
If the US government won’t allow crypto to blossom, it’s very likely China will. The People’s Republic has already tasked its central bank with creating a digital version of its currency, the renminbi. For the Communist Party, the advantages are twofold: digital currency can be used to surveil Chinese citizens more closely than ever, and it will be a tool to pressure other countries to abandon the US dollar as the world’s main reserve currency. If this begins to take place, it’s a safe bet Congress and the United States will look at Facebook’s Libra in a different light.
Jeff John Roberts is currently Executive Editor at Decrypt. He previously wrote about IP, blockchain, and cybersecurity for Fortune, and his work has appeared in a variety of other outlets, including BusinessWeek, Reuters, and the New York Times. In 2016 he finished a Knight-Bagehot Fellowship in Economics and Business Journalism at Columbia Business School. Roberts covers subjects such as patent reform, blockchain technology, hacking, and privacy in the age of social media. He is an authority on copyright law and other intellectual property issues and is licensed to practice law in New York and Ontario. He has appeared on BBC, CNN, NBC, CheddarTV, and other outlets to share his perspective on technology and the law.
Reprinted by permission of Harvard Business Review Press. Excerpted from KINGS OF CRYPTO: One Startup’s Quest to Take Cryptocurrency Out of Silicon Valley and Onto Wall Street by Jeff John Roberts. Copyright 2021 Jeff John Roberts. All rights reserved.
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