To paraphrase an old saying: Patriotism is the last refuge of … crypto.
In the latest salvo designed to bring Libra back from this week’s brink, where each week seems to bring a new brink, it’s now the U.S. versus China. As Bloomberg reported on Thursday (Oct. 17), Facebook’s Co-creator of Libra David Marcus said that if Libra goes down, China is handed a victory in its own efforts to develop a cryptocurrency.
Marcus, of course, helms the Libra initiative. In an interview with the newswire, he said that “the future in five years, if we don’t have a good answer, is basically China rewiring” a significant part of the world “with a digital renminbi running on their controlled blockchain.”
Against that backdrop, he noted, blockchain and national digital currency are protected from U.S. sanctions. In addition, the Chinese effort would create a new reserve currency.
The remarks come amid the continuing struggle by Libra to gain traction, not just with lawmakers, but to close ranks within its own project. As has been widely reported, the membership roster saw high-profile defections, with Visa, Mastercard, eBay and others leaving — out of an original 28 members, seven members left. The Libra Association said, however, that there are perhaps 180 out of 1,500 companies that have expressed interest in joining up, which would ostensibly bring the project further along to its stated goal of a 100-member consortium, and a 2020 debut.
As noted in this space, China has been moving to issue digital currency through its central bank. The nation joins a few others that are testing out both the idea and execution of fiat done in bits and bytes. Switzerland has put a toe (or a few toes) in the water by examining how digital currencies might be used in a trading environment, and is gearing up to see what a digital Swiss franc might have to offer in transactions. The effort is being done in tandem with SIX, which operates the nation’s stock exchange. The Bank of England as well has, through Governor Mark Carney, mulled the issuance of a digital currency backed by several nations.
Each of those efforts — and others — could conceivably pose an alternative to the dollar as reserve currency. From alternatives spring threats to dominance, and from threats to dominance spring (at least to some observers) a dilution of the heady economic standing the U.S. enjoys.
Bringing China’s central bank in as an ultimate reason to develop a crypto smacks of an economic arms race, but it does not address the previously stated goals of Libra to foster financial inclusion. Welcome, then, to Libra as patriotic duty.