Digital Currencies Are Changing The Money Landscape

libra facebook

Government-mandated money in the form of legal tender is a historical anomaly. For much of mankind’s history private monies and quasi-monies competed alongside each other. Now, again, a new era of private money competition is resurging and reshaping our world.

Money, finance, and banking are currently experiencing the “Great Unbundling”. Value chains within finance are being broken up across the spectrum. Customers or users are no longer obtaining their money services as an all-in-one package from a single universal bank but increasingly follow a best-in-class approach in which the best offers from many different providers are chosen.

This trend of the fragmentation of financial services has also been recognized by the tech giants of our time. Amazon, Apple, Google, and Facebook are all pushing into the financial sector. Amazon, for example, already offers loans and other financial services in some countries. Apple and Google Pay are already part of our everyday lives through iOS and Android devices. Facebook recently launched its payment system, Facebook Pay. WhatsApp's payment system was already active in Brazil when it was halted by the Brazilian central bank (the service is bound to relaunch soon).

Facebook’s Libra Money Scheme Never Went Away

As far as the largest social network in the world is concerned, the goals have been set even higher. In mid-2019, the tech giant announced its intention to launch the digital currency libra, which would be based on a consortium of several members. Soon after this announcement regulators and politicians all around the world began speaking up against this endeavor. Their fear: libra would be an ideal vehicle for money laundering and tax evasion that could potentially destabilize today’s financial order.

After a lot of headwind, the people behind the project not only rebranded libra but came up with version 2.0, called Diem. Not only was the conglomerate consisting of twenty-seven members, with Facebook as one associate, renamed the Diem Association, the project has also changed its structure and goals significantly. While with the first design proposal much of the emphasis was on the libra stablecoin, Diem is designed to become a generic platform for digital programmable currencies. As such, a digital dollar, euro, or pound (e.g., ≋USD, ≋EUR, or ≋GBP) is supposed to be running on Diem’s infrastructure. These digital versions would each be backed by a reserve of assets made up of cash or cash equivalents and very short-term government securities (essentially government bonds) in the respective national currency.

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