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Does Facebook’s Libra currency have any future?

Ever since the emergence of cryptocurrencies, most notably of course Bitcoin, they have been beset by a number of problems, but they all fundamentally boil down to one issue. What exactly are they for? That is, what exactly is the problem they are solving?

This is more important than ever as we await the introduction of Facebook’s play in this space, Libra, heavily trailed this week ahead of its expected launch next year.

As with much commentary on cryptocurrencies, much of the coverage has centred on the technical spec that Facebook have (loosely) sketched out for Libra, as well as the aspirations that the Menlo Park giant has for its new creation in the developing world, in particular cheap cross border money transfers and financial access for people currently unbanked.

Those are for sure highly laudable aims, and the technical architecture of cryptocurrencies is inventive and innovative and as such not surprising that among the tech-savvy there has been huge interest in them since the start.

For everyone else though, in terms of actively wanting to hold and use cryptocurrencies for normal financial activities (as opposed to get-rich-quick dreams), not so much.

My economics teacher at school told us a mnemonic to remember the functions of money - ADDSUP. It stood for Acceptable, Durable, Divisable, a Store of value, Utility and Portable. The problem with Bitcoin and its peers has always come down to the A and the S in particular - few will accept it in normal commerce because it’s been a terrible store of value. It’s been so volatile that you have no way of knowing from one day to next what your Bitcoin money is going to be worth. No one in their right mind would sign an employment contract that agreed to pay them in Bitcoin.

Other than as a potential money maker, Bitcoin is not remotely useful to most people. It falls at the first hurdle - its acceptability.

Which brings us to Libra. Cross border transfers are indeed ripe for disruption, and many fintech startups have this lucrative money maker for the traditional banks firmly in their sights. And across the developing world mobile phones are revolutionising commerce and finance for hundreds of millions of people.

Facebook could easily create a product that catered to these needs, a Facebook version of PayPal. They don’t need to create a new unit of currency to do this, but that’s exactly what they have chosen to do.

They’re already facing a barrage of questions and raised eyebrows from regulators around the world, as well as privacy campaigners who have long been wary of Facebook’s methods.

This is unlikely to have come as a surprise to Zuckerberg and his team. They will have been well aware that consumer finance comes with lots of regulatory oversight and it’s highly likely they have announced Libra so far ahead of its planned launch exactly to precipitate these conversations and issues.

But even if they navigate the regulatory and privacy minefields, it will all be for naught if like Bitcoin Libra is just a clever piece of tech that most people don’t trust because it doesn’t do anything better than what they’ve got already - their pounds, dollars, Euros and the rest.

Just like every other cryptocurrency, for the non-tech audience and people who have no interest in making secret transactions, what exactly will Libra be for? What problem is it solving that can’t be done with existing currencies?

If people are going to accept and trust Libra, unlike Bitcoin and co, those are the questions that need answers. Bitcoin and its proponents have never managed to. Now it’s Facebook’s turn to see if they can do any better.

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