Facebook’s new proposed cryptocurrency, known as Libra, has faced numerous hurdles in the lead up to its launch sometime in 2020. Among those hurdles has been the inability to convince a single country’s central bank to accept Libra, making it unlikely that the cryptocurrency will be able to be used as an actual currency. This led Ueli Maurer, the President of Switzerland, to declare Libra had “failed” in its current form.
A cryptocurrency is a type of digital currency created by a computer algorithm, which can be used to pay for goods and services in the same way that more conventional currencies could be. Cryptocurrencies were created to exist outside the scope of traditional government regulation or backing, and the original cryptocurrency, Bitcoin, was created with the express intent that it would replace government-backed currency controlled by central banks. However, most institutions have been cautious to accept cryptocurrency as legitimate, due in part to the lack of regulation or national backing that is central to cryptocurrency’s appeal.
Facebook had hoped its new cryptocurrency offering, Libra, would be able to assuage the fears of government regulators by finding corporate partnerships to support it, as well as by holding a diverse collection of other currencies that would act as backing for Libra to limit volatility. However, central banks in the United States, Europe and elsewhere have been reticent to embrace Libra, because of the threat it potentially poses to the current financial system. Not helping matters are numerous scandals Facebook has faced with respect to protecting user data, making financial authorities wary of entrusting Facebook with the kind of financial data that would be generated by transactions using Libra. These factors combined make it unlikely that Libra will find adoption when it is finally introduced to the public.
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