Facebook has just announced that it plans to launch Libra, a cryptocurrency which will enable users to make international payments over Messenger as well as other messaging platforms such as WhatsApp.
Users will be able to buy Libra, keeping a balance of the currency in Facebook’s digital wallet, Calibra. They may either transfer currency to another user or purchase goods and services from a participating online retailer. Users will also be able to purchase and sell Libra through third party wallets or local resellers in the same way as mobile phone owners currently top up their data. Facebook has said that a key rationale for introducing this cryptocurrency is that it wishes to facilitate financial inclusion as it would enable millions of users, including those without bank accounts, to transact in ways that formal financial systems have denied them. The transactions would be cheaper and faster too, because users could complete transactions on a peer-to-peer basis, without the need of going through a bank.
Facebook suggests that Libra is designed to overcome a common criticism of existing cryptocurrencies such as Bitcoin: they fail to satisfy three essential characteristics of money: acting as a media of exchange, a store of value and a unit of account.
However, there appears to be some scepticism over the consequences of the imminent launch of this new cryptocurrency: it might end ‘the state monopoly over the control and issuance of money’, the ensuing results of which remain unclear; potentially severe economic crises may follow from such a drastic change, having serious implications for global financial stability and systemic risk.
Students planning to apply to Economics or Politics, particularly those with an interest in economic policy-making and the use of rapidly-enhancing technology in digital finance and economy, may consider deliberating on the possible revolutionary ramifications of such a project.
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