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A lot of people are keeping close tabs on Facebook’s new digital currency project. Known as Libra, it will either change the world as people know it, or fail to make any meaningful impact. There are several reasons to not get too involved in this project right away, primarily because a lot of unanswered questions remain in place. 

The Trust Problem Can’t be Ignored

There is a very big difference between using Facebook for social media purposes and trusting the company’s digital currency project. Libra, while maybe appealing to some people, has a lot of things to prove. The main question is whether or not this will cause even more trust issues between Facebook and its users. The company does not have a good reputation in terms of keeping private information private, after all. 

According to some people close to the matter, there will not be any trust issues. In fact, David Marcus claims how users will not have to trust the company in order to make full use of Libra. This sounds appealing on paper, but in the real world, it raises a lot of questions. It seems this business model will ensure Facebook acts as a custodian of user funds. However, if the company doesn’t need to be trusted, it will be interesting to see how much control the end users have when everything is said and done. 

Political Concerns and Vulnerabilities

Perhaps the biggest drawback of Libra in its current form is how the development of this project has not received regulatory approval. In fact, the US Congress would like to potentially investigate this entire ordeal before it is even released to the public. There is also some concern this venture will pose a threat to the financial system, similar to how Bitcoin is treated in the United States.

For the time being, the demand to delay the Libra launch is nothing more than an official request. That doesn’t mean an investigation will be launched, although things should become a lot more clear in the coming weeks and months. Some oversight regarding this digital currency would certainly bring more legitimacy to Facebook’s new venture. Leaving this new form of money unregulated could create very dangerous precedents for the future. 

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Thumbs Down From Experts

The public perception of Libra, as well as parent company Facebook, is not helping matters much.  While some will claim everything has been blown out of proportion, it is often better to tread with caution rather than going in head-first. This is especially true when it comes to financial ventures in this day and age. 

As Joseph Stiglitz pointed out in a rather interesting post, this entire project gets the “thumbs down”. Since Facebook’s business model seems unclear, there is more than enough reason to be concerned. It is very difficult to create a digital currency with a fixed value, especially when multiple fiat currencies are involved. Stiglitz welcomes government scrutiny where this project is concerned, for rather obvious reasons.

Too Many Unanswered Questions

It is rather apparent Facebook has issues with transparency in every way one can imagine. Even when it comes to explaining Libra to the masses, there is still a lot of valuable information which has yet to be unveiled. Especially when it comes to the reserve holdings, potential interest returns, and the uncertain incentive system, a lot of crucial aspects need to be addressed fairly soon. 

As far as the governance model is concerned, things are not as cut-and-dried either. It is unclear how the battle lines will be drawn among council members, as those with more skin in the game will undoubtedly attempt to get their decisions put through by whichever means necessary. This can spell trouble for this project from day one, unless proper countermeasures are put in place to prevent shenanigans from happening. 


Disclaimer: This is not trading or investment advice. The above article is for entertainment and education purposes only. Please do your own research before purchasing or investing into any cryptocurrency or digital currenc

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