By Tim McCausland
Managing Director – Private Banking
Orange Bank and Trust Company
In astrological terms, Libra is represented by balanced scales and, just like blind Lady Justice, Libra is associated with fairness, equality and, yes, justice. In Mark Zuckerberg’s world, Libra will be a financial infrastructure providing “people everywhere access to safe and affordable financial services.” It is scheduled to launch sometime this year.
Fashioned by The Zuck as a not-for-profit, Libra will essentially be a Facebook-sized payment arrangement built with blockchain technology and using cryptocurrency as the means of moving money through and around the planet’s payment systems. Payment systems provide for the way we all pay and get paid for, well…everything.
As you might expect, Libra is not the only payment system out there vying for preeminence and institutional adoption. But, with Facebook and Zuckerberg as the wizards behind Libra, the new platform has earned attention and scrutiny, much as Facebook has for its monopolistic inclinations. In fact, the push back was so swift and severe that Libra determined to allow, for now, other cryptocurrencies on the platform.
The stakes are high for any firm looking to play a role in the global payment system and, for America, which is still the world’s leading economic power, the market holds great potential. By and large, Americans still lag the world in our use of electronic payments. Adoption is growing, but most of us still use checkbooks, here and there. You won’t find many checkbooks in Hong Kong.
In the econosphere of payment systems, Libra is unique for one attribute that bears highlighting – it is backed by a reserve of cash or cash equivalent assets. It doesn’t hurt, of course, to be the brainchild of the third richest person on Earth. Cash backing of a cryptocurrency is significant and a clear differentiator from other cryptocurrencies for this support should help stabilize the system, promote accountability to and for all users and, most importantly, it should instill a confidence in users regarding the integrity of the program.
So, what’s in it for Facebook, an unabashed, for-profit goliath? While Libra is a “not-for-profit”, part of its framework includes an open source software development model that “will foster a vibrant community of developers building products and services to help people access and use the Libra payment system.” Libra will likely leverage the work product of this vibrant community of developers as they create apps or advance some other valuable functionality.
Cue Calibra – Facebook’s for-profit subsidiary that was built to operate “on top of” Libra’s blockchain structure. Simply stated, Calibra will be Facebook’s true payment system platform that utilizes Libra as the (crypto)currency of record, while harnessing the power of the law of big numbers – the user base of Facebook, Instagram and WhatsApp.
Facebook launched Libra with the look of an innocuous, cloud-based think tank with the stated ideal that “people everywhere can live better lives.” But, in that cloud is a bolt of lightning. Its astrological name is Calibra. And its sign is a virtual cash register.