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Last year, when Facebook officials were hauled in front of Congress to defend their plans for a cryptocurrency called Libra, they arrived with a speech on financial inclusion. With Libra, people anywhere in the world would have access to a common payment network, they said, regardless of whether they had access to a bank. All that was needed was a phone and a Facebook account.
Representative Rashida Tlaib, (D-Michigan), a member of the “team” of first-term progressive lawmakers, had heard similar speeches before. Its Detroit borough, the third poorest in the country, is populated by the very bankless people that Facebook executives described. In the past, faster tax returns, salary advances, or check cashing without a checking account were promised. But these offers came with little regulation and often with excessive fees or interest rates. Now, here’s Libra, a cryptocurrency that also seemed on the verge of falling through regulatory cracks, backed by an industry with a lot of power and data. He wondered if this was the next iteration.
“People don’t realize this is coming. I feel like a mother bear and I have to be careful about what’s coming for my district and my neighborhood, ”Tlaib says. That’s why he wants to talk to you about something called a stablecoin.
Not familiar? Glass eyes? It’s a bit of a niche for now. Stablecoins are a form of digital currency that, as the name suggests, hold a constant value. This is what Libra is, technically, but there are many other flavors. Stablecoins might be backed by a real currency or a basket of assets, or they might use algorithmic tricks to stay constant, but the point is that their price, let’s say, in dollars, doesn’t change. It’s a promise. Stablecoins were initially used to help with the buying and selling of volatile cryptocurrencies such as bitcoin. But increasingly, some stablecoins, like Libra, have been proposed for more common uses, such as paying for real things. This is because they can be fast, easy to use on phones, and are, well, stable.
The problem is that stablecoins aren’t much more familiar to members of Congress and regulators than they are to you and me. In last year’s Facebook hearings, everyone seemed to want Libra to be regulated, but the unanswered question was how. So this week, Tlaib unveiled a bill, co-sponsored by representatives Stephen Lynch (D-Massachusetts) and Chuy Garcia (D-Illinois), that offers a possible solution: requiring banks to issue stablecoins that promise a fixed value. in US dollars. This, lawmakers argue, constitutes acceptance of a deposit, which only banks can do – not the tech companies or the associations they have created to issue coins on their behalf.
This logic targets Facebook’s stablecoin plans exactly. This year, while we were concerned about social distance and reproductive values, Libra has undergone major changes. Instead of a borderless global currency backed by a number of currencies and assets, it is now being offered as a series of coins for different places: a euro-denominated coin for Europe, a dollar-denominated US coin, and so on. . This gave some relief to central bankers who were worried that Facebook’s currency might compete with their ability to control the local money supply. Libra also ditched a plan to eventually allow anyone to create services on its network, a feature that raised money laundering concerns, in favor of a closed system controlled by its official members.
Oh, and there have been a few name changes along the way. Facebook’s Calibra division, which is designing the company’s Libra wallet, now wants to be called Novi. And earlier this week, Libra itself, both the currency and the association that issues it, became Diem. I got it? Novi treats Diem. Think of it as an effort to assert the independence of the project from Facebook, although, as a reminder, the company came up with the idea, built most of the technology, established the partnership with close allies, and will likely provide far and wide the most users for whatever currency is issued.
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