Cryptocurrency

After (And Among) The Libra Headlines, Caution And Clamor

libra

All Libra, all the time?

Maybe even no Libra, or a long wait until Libra.

If there might be an overarching theme this past week on the as-yet-to debut Libra cryptocurrency it would boil down to a single word:

Caution.

And another word: Clamor.

Yes, much has been made of the mechanics of Project Libra. You likely need no introduction to the currency (a guide to the who, what, where and possibly why was penned in this space by Karen Webster). But as with any grand design, rolled out on a grand stage, there is promise and peril. Depending on which side of the audience you find yourself, well, that dictates the view on Libra.

The fact remains that much of the focus has been on Facebook, but there are a lot of moving parts to the equation (ie, lots of stakeholders, such as Visa and Mastercard and others who are tied to the non-profit consortium exploring and shaping Project Libra).

Wall Street seems focused on the social media giant, beleaguered as it is with privacy concerns. As noted in CNBC, many sell-side firms have been loud with praise for the initiative.

“In terms of scale and importance, we believe this new financial infrastructure could be viewed similar to Apple’s introduction of iOS to developers over a decade ago,” RBC said.

And, separately, “Unlike most other cryptocurrencies currently in circulation, this one is backed by the reserves of real assets and governed by an independent association made up of credible industry players, which should both limit the volatility of the currency and bring much needed credibility to this initiative,” SunTrust opined.

We note that this is a bit of speculation over, well, speculation. Volatility has marked cryptos from the beginning and the white paper outlining Libra itself notes that there could be volatility. That makes sense because currencies (even a basket of them) can be and sometimes are volatile too.

One analyst at JPMorgan said that there is the potential to “empower billions globally.” That ambition may be a noble one, but as Webster noted last week, the bar of trust — that is, jumping into and embracing a new payments paradigm that rides a new network — is a high one to hurdle. There already are a lot of networks that enable the unbanked to become banked, to become full members of financial society, without toeing such uncharted waters.

The caution? That comes from the regulatory side, where cryptos in general have been gaining increasing scrutiny. Take the central banks, where the Libra model — spanning the Libra Association to the actual workings of the crypto itself — would mean a de facto departure from a model that has been around for a long, long time.

Said Bank of England Governor Mark Carney late last week: “The Bank of England approaches Libra with an open mind but not an open door. Unlike social media … the terms of engagement for innovations such as Libra must be adopted in advance of any launch.”

That spells regulation and caution. The same caution was echoed on our side of the pond, where the U.S. Senate Banking Committee is slated to conduct a hearing on the project next month. Beyond the Senate lies scrutiny from the House, where Rep. Maxine Waters, the Democrat chair of the House Financial Services Committee, said there will be a hearing in store for Facebook to testify before her committee. She also asked for the project to be put on hold as lawmakers studied Libra.

Might the drumbeat grow louder for caution before clamor? We’re a few weeks away from the Senate hearing — and from finding out.

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Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The July 2019 Pay Advances: The Gig Economy’s New Normal, a PYMNTS and Mastercard collaboration, examines pay advances – full or partial payments received before an ad hoc job is completed – including how gig workers currently use them and their potential for future adoption.

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