Libra Loses Momentum As Fiat Replacement

For a while, many experts were pointing to Facebook’s Libra stablecoin as the leading replacement for fiat currency, but that momentum has since disappeared as regulators began to have their say. 

One of the common predictions in the crypto space is regarding when the “social consensus flip” will occur. In other words, when will some form of cryptocurrency overtake fiat currency as the de facto currency of the world. Right now, the USD clearly has the upper hand in terms of market capitalization and global perception, but that is expected to change by 2030. 

Other Candidates In the Melee

Libra was thought to be a good candidate, but regulators have since torn it apart for the instability it could bring to the world, just as crypto enthusiasts said it didn’t actually represent the views and ideas that the crypto world holds so dear. The centralized design and its connection to Facebook’s recently stained privacy reputation have put it into most Bitcoin enthusiasts bad books. 

China took the introduction of Libra as impetus to speed up the development of its own cryptocurrency, and the backing of the Chinese government could give it a significant advantage over other participants in the market. 

As an investment, Bitcoin is neither viewed as a sovereign currency nor a corporate currency, which does give it an advantage in many investors’ eyes. However, this comes with the caveat that it has no formal backing, and has a very volatile price. 

Adjusting the Perception

Libra should not be fully discounted at this point, but the committee has a lot of work ahead of them if they are going to redesign the protocol so it fits within US regulators’’ definition of a commodity. They have already had to remove the dividends payable aspect and some conflicts of interest that were inherent to the design, and now they need to work on the basket of goods that are used to back the coin. 

Stablecoins are tricky in that they fall in a strange middle-ground when it comes to being classified as a security versus a commodity. Securities indicate an explicit claim on assets, which comes with different tax and legal considerations from a commodity. Ideally, Libra is able to be perceived as being supported by assets without having a claim on those assets – a tricky classification to aim for, but the only way to bring about its success. 

One thing that holds Libra back from the freedom given to Bitcoin is the corporate backing they have. Although this could also be perceived as a positive, these companies could potentially suffer recourse from the government for violations by Libra. No one even knows who started Bitcoin and there is no figurehead to skewer for violations.