Mark Carney on Libra: A Potential Solution to Financial Problems?
A cryptocurrency developed by Facebook? If you asked this question a couple of years ago, most people would have said that it is not a possibility. Nevertheless, we now have Facebook Libra, a new cryptocurrency developed – in large part – by the social media giant.
Libra is created from the ground up for the purpose of financial inclusion. It is meant to be the solution for those with little to no access to banking, offering things like faster online transactions and lower transaction fees to more users.
It is, however, still a cryptocurrency, built on top of the Libra Network blockchain technology. Facebook has said that it will not actively manage Libra. Instead, a consortium of stakeholders that include names like PayPal, Lyft, and Mercy Corps will lead the way.
Ample Support from Stakeholders
What’s interesting about the release of Libra is how many stakeholders now showing support for the cryptocurrency, albeit in a more reserved way. The U.S. Federal Reserve Chair Jerome Powell expects Libra to meet high standards before it can proceed but then confirmed that the Fed will not impose strict controls over the cryptocurrency.
In another interesting move, Bank of England governor Mark Carney also showed his restrained support for Libra. In Financial Stability Report remarks, Carney acknowledges the problems Libra is trying to solve.
“It’s way too expensive to do domestic payments. It’s way too slow, and that hurts consumers and businesses. It stifles innovation, and it’s far too expensive to send money cross-border, and there are huge financial inclusion issues related to that and costs related to that.”
Carney added that Libra has the potential of coming up with a better solution thanks to its large number of stakeholders. With key players like PayPal behind the new cryptocurrency, it will not be surprising to see Libra being adopted at a much faster rate than other coins.
Care Is Needed
Some degree of care is still needed, according to Carney. Mimicking Powell’s remarks on the high standards that Libra must meet before it can be widely used, Carney suggests more efforts to make Libra perfect from the beginning, all for the sake of the crypto’s future.
“It’s either successful or it isn’t. If it’s successful, it becomes systemic, because it would involve a very large number of users. And if you’re a systemic payment system, it’s 5-sigma. You have to be on all the time. You can’t have teething issues. You can’t have people losing money out of their wallets … The standards are in a different zip code — to use the American term.”
In the same statement, Carney also listed areas in which Libra needs to be perfect, including security and anti-money laundering measures. Libra will be a huge factor in the market, so it cannot afford to fail after it becomes widely used by users.
Areas such as risk management and rebalancing are also important. Unfortunately, these areas are relatively new domains for cryptocurrency and the underlying blockchain network. Blockchain, by default, is designed to be self-balancing; that is not always the case with the market as a whole.
You can see from monitoring real-time crypto prices on sites like Coins.live that crypto prices aren’t always following the traditional financial market norms. According to experts, Libra needs to conform to those norms more, at least to some degree.
A Shift in Focus
These areas need to be the focus of future Libra development for the cryptocurrency to be stable enough for public use. After all, a systemic payment system failure isn’t something the market can simply move on from, especially when there are millions of users involved in the system.
Still, we can all see remarks from figures like Carney and Powell as good signs going forward. The consortium behind Libra – The Libra Association – is working hard to make sure that the foundation of this new cryptocurrency is laid correctly before Libra can be a solid substitute for cash transactions.
Andreas Townsend Author
I am a technical writer, author and blogger since 2005. An industry watcher that stays on top of the latest features, extremely passionate about finance news and everything related to crypto.