Barry Eichengreen, a Professor of UC Berkeley, is of the opinion that Facebook planned Stablecoin Libra come across too many “unsolvable” problems and to much resistance on the part of the governments, than that he might ever be actually implemented.
On today’s Unitize conference, he said:
Libra is an interesting idea that will never see the light of the world.
Eichengreen sees major problems in the case of stable coins
In General, the monetary historian Eichengreen feels the Stablecoin-sector as a Whole is largely ignorant of the monetary economy and the history. He said his economic work has led to invitations “to a series of lunch in the excellent Restaurants in San Francisco with the founders and donors of the future,” stable “coins”. The response that he drew for himself was that there is a lack of potential operators of such stablecoins to fundamental Knowledge. Some, he told did not even think of earlier speculative attacks on the linked exchange rates.
My conclusion was that my lunch companion knew all about the Blockchain, but they did not know much about monetary Economics.
In addition, Eichengreen sees significant weaknesses in the current stable coins.
Stablecoins are either fragile, they are vulnerable to attacks and failures, if they are only partially or with actual dollars – or dollars-Bank balances, secured, or they are prohibitively expensive to increase when you are actually secured completely or excessively.
Stablecoin supporter naive
While many analysts believe that Facebook Libra has the potential, the existing financial system, vigorously shake, is Eichengreen different opinion. He points out that, despite the publication of a second white paper in this year’s “Facebook’s private label stablecoin” to many “unsolvable” challenges is plagued.
He said there were fears that Facebook Libra “is the effectiveness of national monetary policies”, both in Emerging as well as industrialized countries “undermined”. He also noted that citizens will decide in countries with volatile Fiat currencies for your local money for the benefit of a globally accepted “Libra-Dollars” to give up.
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Without Central banks would be nothing Facebook Libra
The economist is also of the opinion that “Libra actually needs a Central Bank, if the markets that emerge around them, to be stable”. At the same time, he notes that national governments appreciate the thought of private money like Libra at all.
The national governments will feel about the creation of a private, Facebook-own and Facebook-powered Central Bank uncomfortable.
In conclusion, there are, in his opinion, some of the very large uncertainties that need to be solved first, so that the creation of a private currency such as Libra and so on. In this respect, Eichengreen looks black, not red.
[…] my conclusion is that some of these problems are unsolvable.
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