Libra Coin Stockholders: A Guide To Investing

Libra is a cryptocurrency developed by Facebook, which aims to address volatility and scalability to create a unique digital currency. Despite Facebook's reputation for moving fast, the Libra project has progressed slowly due to scrutiny from regulators worldwide. The project is now known as Diem, and it is expected to launch before the end of 2021. While you can't buy Libra directly, there are a few ways to invest in it. One way is to buy Facebook stock, as the value of the new economy is likely to flow into Facebook's stock price. Another way is to use the Libra Method website, which is currently the only platform where you can buy and trade Libra outside of the U.S. It's important to note that Libra is a high-risk investment, and you should only invest if you are prepared to lose all your money.

Libra's value proposition

Libra Coin is a cryptocurrency founded by Facebook in 2019. It is a product of a consortium of 28 companies, now governed by the Diem Association, which includes tech companies like Uber and Spotify, and VC firms like Andreessen Horowitz and Union Square Ventures. The Diem Association has the majority stake in the project, which has shifted from Facebook.

Libra Coin is not yet available to buy, but there are a few ways to invest in the project. Firstly, you can buy Facebook stock. Facebook is still heavily involved in the project, and the company's reach and popularity will likely contribute to the success of the coin.

Secondly, you could invest in one of the heavyweight backers of the project, such as Visa, Mastercard, or Uber. These companies will collect any interest accrued on the reserves through Libra Investment Tokens, which also give them voting power over how the reserves are managed.

Finally, you could invest in Bitcoin. Libra has caused a surge of interest in the original cryptocurrency, and it is likely that Libra will eventually trade alongside Bitcoin on crypto exchanges, bringing millions more people into the Bitcoin economy.

Libra Coin is expected to launch in 2024, and it will be interesting to see how it fares in the cryptocurrency market.

Libra's regulatory issues

Facebook's Libra project has raised many regulatory issues and questions. The project was first announced in June 2019, and it was met with scrutiny from global regulators and lawmakers. The concerns raised by regulators centred around the potential impact on investor protection, financial stability, and market integrity, and anti-money laundering.

One of the key worries for regulators was whether Libra would compete with sovereign currencies like the US dollar and the euro. Facebook argued that it would not be minting new money with its digital currency, and that it would not "threaten the sovereignty of nations when it comes to money". However, regulators were concerned that the influence of Facebook, with its vast user base, and its partnerships with large companies, could diminish the role played by regulators and affect their ability to monitor and mitigate systemic risk.

Regulators were also concerned about the potential impact on financial stability. Libra could have become a significant source of systemic risk for the global financial system. If Libra replaced a significant fraction of the existing payments system, then its failure would be catastrophic. In addition, if the Libra Association guaranteed convertibility into a national currency, then the Libra Reserve would operate as an open-end mutual fund, subject to runs on less-liquid assets.

Another issue raised by regulators was the potential loss of seignorage and monetary control for countries whose currencies were not included in the Libra basket. The shift from domestic currency to Libra would reduce government revenue from seignorage and damage public finances. It could also lead to a loss of control over the country's monetary and payments system, making it difficult to maintain price stability.

The regulatory response to Libra took on a decidedly more urgent tone, and it has had a lasting impact on the regulatory approach towards cryptocurrencies. The Bank for International Settlements (BIS) and central banks have published numerous documents about stablecoins, and there have been discussions around central bank digital currencies (CBDCs). Facebook's Libra project has been a wake-up call for regulators, highlighting the need for rapid, international coordination of financial regulation.

Libra's association with Facebook

Libra is a cryptocurrency announced by Facebook in 2019. It was initially called the "Facebook Coin" and was intended to be a simple global payment system that would empower billions of people to access financial services. However, following regulatory scrutiny, Libra has been forced to rebrand to Diem.

Facebook won't have centralised control over Libra, instead, it will have just a single vote in its governance, like other founding members of the Libra Association. The Libra Association is a separate organisation set up in Switzerland, which includes 27 members: mostly tech companies like Uber and Spotify, plus VC firms like Andreessen Horowitz and Union Square Ventures. Each founding member paid a minimum of $10 million to join and optionally become a validator node operator.

Facebook is launching a subsidiary company, also called Calibra, that handles its crypto dealings and protects users' privacy by never mingling Libra payments with Facebook data so it can't be used for ad targeting. However, Facebook/Calibra and other founding members of the Libra Association will earn interest on the money users cash in that is held in reserve to keep the value of Libra stable.

Facebook's VP of blockchain, David Marcus, explained the company's motive and the tie-in with its core revenue source: "If more commerce happens, then more small businesses will sell more on and off platform, and they’ll want to buy more ads on the platform so it will be good for our ads business."

The Libra project was first announced in June 2019 as a bold yet risky endeavour to revolutionise money transfer and position Facebook and its partners on the ground floor of a new, blockchain-based digital payments industry. It had two parts: a Libra token, designed broadly similar to other cryptocurrencies like Bitcoin but with fundamental differences intended to make it more stable and less of a speculative asset, and a blockchain network that would be the technical foundation of the token and the tool for verifying transactions and token ownership.

Despite these measures, the Libra project was met with swift and vocal backlash from across the political spectrum. Regulators were concerned about Facebook's potential outsize influence on the project, and the unforeseen consequences of allowing for-profit companies to begin issuing currencies and injecting themselves into global economics and geopolitics.

Libra's investment tokens

Libra Investment Tokens are an enticing prospect for investors. The tokens are like shares in a company, offering voting power over the management of the reserves that back the Libra cryptocurrency. These reserves are interest-bearing instruments, and the interest accrued will be collected by heavyweight backers of the Libra project, such as Visa, Mastercard, and Uber.

The Libra Investment Tokens are distinct from the Libra cryptocurrency, which will be used for transactions. While the tokens represent voting power and derive value from expected future cash flows, the Libra currency will only be worth its face value.

For investors, purchasing equity in one of the organisations that will own Libra Investment Tokens may be a better option than buying the Libra currency itself. Facebook, the creator of the Libra project, expects the participant list to grow to 100 or more companies. However, it is important to note that the Libra-related earnings of these corporations may be negligible, and investors may be better off owning government bonds directly.

Another option for investors is to buy Facebook stock. As the creator of the Libra project, Facebook stands to benefit from the widespread adoption of the Libra cryptocurrency. Additionally, Facebook's reach could make it easier for the company to roll out a global digital currency successfully.

Libra's stablecoins

Facebook's Libra is a "stablecoin", a type of cryptocurrency that maintains a stable value and is backed by "real" assets. In the case of Libra, these assets include a basket of international currencies, such as the US dollar, the euro, and the Japanese yen. This is in contrast to cryptocurrencies like Bitcoin, which are highly volatile and not backed by any assets.

The Libra Association, the organisation that technically owns Libra, has stated that each Libra coin in circulation will be backed by low-risk assets of equal value, including various currencies and short-term government treasury bills. This fully backed reserve is intended to minimise volatility and make Libra a stable store of value.

Libra's stablecoin design has several potential benefits. Firstly, it could serve as a more efficient medium of exchange for international transactions, eliminating the complexity of exchange rates and transfer fees. Secondly, it could provide a more stable investment option compared to volatile cryptocurrencies like Bitcoin. Finally, it could provide financial inclusion for the world's "unbanked" population, estimated at around 1.7 billion people.

However, Libra has faced significant regulatory scrutiny and opposition due to concerns about privacy, money laundering, consumer protection, and financial stability. There are also concerns about centralisation and the concentration of power in the hands of private companies. As a result, several original partners, including PayPal, Mastercard, and Visa, have backed out of the project.

Despite these challenges, Facebook remains committed to launching Libra and continues to work with the remaining members of the Libra Association. The association aims to launch Libra in specific countries rather than a grand, world-conquering unveiling, with Switzerland, Singapore, and emerging economies in Southeast Asia and Africa as potential candidates.

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