How Libra Benefits Global Blockchain Development
The latest statements coming out of Germany’s federal ministry of finance demonstrated once more the controversy around Facebook’s Libra project. While governments and central banks view Libra as a threat to monetary sovereignty, proponents point to the opportunities for developing economies and Libra’s potential benefits for financial inclusion.
The most significant result of the debate about Libra is that blockchain has been brought back into the spotlight. Blockchain is way more than Libra, the technology has a wide range of use cases – and Libra is only one of them.
Since Facebook announced to launch a digital currency in the first half of 2020, cryptocurrencies and other blockchain applications have received significant attention from the media and governments. The latest debates in China and India are prime examples: The Chinese central bank announced to introduce its own cryptocurrency before Libra’s launch. In India, a commission with representatives from several ministries has recommended the government to ban the use of cryptocurrencies altogether.
Both are bad news for Facebook. Libra aims at reducing the cost of international transactions, which users may choose to execute via apps like Whatsapp. Among the target customers are people who earn their money in other countries and send larger sums to friends and family back home. Considering Facebook’s and Whatsapp’s massive user base in India, Libra could generate enormous profits from remittances by Indians working and living abroad. That also means the Indian government could become a gatekeeper for Libra.
And even if Facebook and Whatsapp are blocked in China, the Chinese government is worried that with Libra, a dollar-centric digital currency could be dominating the global digital ecosystem. To prevent this from happening, the Chinese government want to launch its own digital currency, to provide an alternative to Libra.
Governments start to understand blockchain’s potential
The Libra controversy has resulted in governments around the world considering the opportunities of blockchain and starting to understand its disruptive potential. The debate about Libra has evolved into a discussion of blockchain. The same Indian commission that has recommended to ban cryptocurrencies also points to the potential of the underlying blockchain technology and has even suggested the government to consider a digital rupee.
Likewise, European politicians would be wise to look at all aspects of blockchain technology and start to drive its development, instead of solely focusing on creating regulatory roadblocks for projects like Libra. The question is not, whether it’s possible to prevent cryptocurrencies from being used, but how governments and central banks can leverage blockchain technology to create attractive alternatives.