3 Questions on Libra (Xavier Lavayssière)


3 Questions To… Xavier Lavayssière, Researcher & Entrepreneur. With a background in Business Public Law and Computer Science, having worked for the French Embassy in the US and co founded “Les Bricodeurs” Xavier delves into the technologies and regulations of cryptocurrencies.



1.

The announcement of Libra has provoked strong reactions from political leaders, some claiming that this is an infringement of their sovereignty. Should governments forbid this project?


Since their inception, cryptocurrencies are a political and cultural movement. Bitcoin was designed to provide a currency without third parties, building on decades of technological activism such as cypherpunks and open source. Libra was inspired by every aspect of this movement: technical architecture, decentralisation vocabulary, financial inclusion claims, and privacy concerns, without a specific focus. There are legitimate concerns to be raised on economic and geopolitical risks of the project. However, at this stage, it relates more at the symbolics of sovereignty rather than it poses a precise threat.


It surprises me how this project triggers reactions while the underlying issues are already known, such as the current balance of power, skills, and vision between US-based private companies and nation-states.

Privacy in payment and financial services is also already confronted to an ever-tightening AML regulation. The current state of the payment and financial industry is not “good enough for this day and age” as points out Mark Carney, governor of the Bank of England. Sovereignty is not a given, but rather a reflection of the ability to act.


More generally, an approach using regulations threats to forbid a specific project from a specific actor without a clear legal basis questions our model. Compared to emerging powers that embrace statism and the rise of protectionism, what is our philosophy regarding economic freedoms? What is our strategy to promote and balance public good and innovation?



2.

So could we see Libra as a new take on cryptocurrencies’ objectives ?


Libra arrives at an interesting turning point in this industry. On the one side, you have cryptocurrencies such as Bitcoin or Grim, driven by passionate people, geared toward censorship resistance and privacy. You could compare them to the Tor browser, a privacy-enhanced web browser, or signal, a messaging app recommended by Edward Snowden. Their adoption is slow but steady as it suits a particular set of needs. Surprisingly, most regulators seem to consider them now as a given, maybe because of their marginal adoption or their resilience.


Blockchains were presented as a pure technology with a confusing broad scope of applications. Governmental institutions are still enthusiastic about their potential but often missing the cultural element.

On the other side, you have had many attempts to adapt the underlying techniques to the financial industry. Blockchains were presented as a pure technology with a confusing broad scope of applications. Governmental institutions are still enthusiastic about their potential but often missing the cultural element. More importantly, to restructure the financial industry is a challenge that will need more than a few startups.

Despite its flaws, Libra brings legitimacy to the objectives and a particular approach. For instance, the choice has been made to develop the underlying layer in an open-source manner and to discuss openly the institutional elements of the project. While it is still unclear how much openness the project will retain in the end, it shows that private companies can see interest in community-driven methods. On the institutional side too, this project suggests that profound reforms could be led, invigorating prior ideas such as central bank digital currency.


3.

So it brings reinforce existing ideas, but does it have a chance to succeed ?


If we look more closely, the project itself is actually twofold, with the Libra currency and its technical architecture on the one hand and the Calibra wallet, a payment solution by Facebook on the other hand.


As a strategic move for Facebook, it is already a success. It has positioned Facebook as a potential leader in the financial industry. Press coverage has enabled the launch of a payment solution. However, looking at similar projects, end-user adoption is still likely to take years and to vary regionally.


As a global financial architecture, the project suffers the tension between conflicting objectives. Financial inclusion itself is a very different topic when talking about US low-income household and the need for low-cost international money transfers. My intuition is that we can expect more turns along the road, but there are enough needs in this ecosystem for the project to find, in a form or another, a suited purpose.



TO GO FURTHER:

  • Libra Compendium - The most comprehensive independant report on Libra, a digital asset initiated by Facebook and inspired by cryptocurrencies.