The German Finance Minister has stated in very clear terms that Diem, formerly known as Libra, will simply not be allowed.
“A wolf in sheep’s clothing remains a wolf. Germany and Europe cannot and will not accept Diem market entry as long as risks are not addressed in a regulatory manner,” Olaf Scholz said according to the German Ministry of Finance.
That follows reports Facebook is hoping to launch it early next year after a re-brand with the wallet connecting to the system now called Novi.
The rebrand is apparently an attempt to distance it from Facebook, with the stablecoin now pegged just to the dollar, instead of a basket of currencies.
However it has faced intense political backlash, with it unclear whether it will spill over to the wider stablecoins and crypto space as Scholz, who is running to become Germany’s Chancellor, said:
“We have to do everything we can to keep the currency monopoly in the hands of the states.”
Currently, it isn’t quite the state that has such monopoly but independent central banks and private commercial banks.
They control the issuance and the contraction of money, but the head of the FED or ECB is appointed by the elected, giving the latter some arms length control over money.
With something like a Facebook dollar, the issuance and the contraction of the dollar currency would still be in the hands of the FED, but its circulation in a digital form would not be limited to commercial banks.
That’s if the fUSD is fully backed and does not operate on fractional reserves, with Facebook becoming a custodian which down the line can also provide further financial services.
Something like this, albeit without the blockchain part, has been running in China for years with WeChat pay and Alipay. WeChat also has its own social network and the like, that includes monetary movements accounting for half of all yuan circulations in the country.
It’s a walled and permissioned system however linked to some extent with commercial banks making it more like a bank account and very different from bitcoin which can move across the world in a permissionless way.
Facebook is most likely trying to do something like WeChat Pay, but with the blockchain on the back-end although the nature of access to it is unclear as it can well be limited to just the Novi wallet, in which case it is no different than WeChat Pay.
Still there could be benefits to this controlled coin especially for the dollar which could well become a global currency at the retail level.
That could pose a threat to weaker currencies, and potentially even undermine the euro, hence perhaps why initially they went with a basket of currencies.
It could also entrench its semi-monopolistic power that could harm innovation by Facebook gobbling up everything that stands on its way.
CrowdTangle is a good example. This nice tool for publishers was bought out by Facebook which now requires incorporation and identification to be a news partner at Facebook, and thus to access CrowdTangle.
In many ways that does threaten journalism of a proper sort as the freedom to publish pseudo-anonymously or under a pseudonym has a long tradition that generally has served our society quite well.
It is Google and Facebook that now decide such freedoms to some extent with their general ranking or inclusion guidelines that often do not much care about certain principles enshrined in the first amendment even when it comes to small and medium publishers.
That is just one of many complains that arise primarily due to their monopolistic nature as otherwise there would be competition and one would be free to choose, but they have eaten out much of their competition by buying it up even if it is ancillarily related to their business.
It isn’t very clear why they wouldn’t try the same for the wider crypto space especially after SEC froze out KIK and Telegram, leaving Facebook and soon after most likely Google with an unchallenged space at the corporate level.
This however is not new. “IBM wants it all,” Steve Jobs shouted in 1984. That bruising fight left IBM as an unmentionable name until it reinvented itself more recently, while Apple had to wait until 2009 before coming back with a bang by launching the iPhone.
Microsoft was left free to focus on expanding and thus won until it was broken up in the 90s.
It isn’t known how this story would have gone had politicians intervened. Especially if to constrain IBM they had written ‘level playing laws’ that applied to the then startups of Apple and Microsoft and many others that didn’t make it.
That story is to suggest this space can most likely compete to win against Facebook and Google, but there is a danger lawmakers may pass regulations which Facebook can meet due to its vast resources, while others can’t due to their still nascent nature. So cementing a Facebook monopoly even while rhetorically they may claim otherwise.
In addition it is somewhat astonishing to see the land of Austrian economics has raised to their Ministry of Finance someone that claims absolute state monopoly over money.
This is the same Germany that to today saves more than any advanced country due to their experience with hyperinflation which was brought precisely because the state had absolute control over money.
Something like Libra wouldn’t offer a recourse to that because it is just tokenized fiat money, but open source new units of account like bitcoin can offer a recourse to the complacency and the ignorance of the state which often fails to appreciate the potentially disastrous consequences of its decisions over their monetary monopoly.
That the state shouldn’t have such total monopoly therefore is articulated by renown Germans themselves, making it curious that it is a German who made what to us looks like a rhetorical slip.
Scholz however might not be familiar with his country’s own intellectual thoughts on this matter, so being a lawyer before entering politics.
He therefore might also not be familiar at all with cryptos beyond the usual five second TV segments that everyone has seen.
However the German civil service is presumably quite familiar and therefore it would be useful to see their report on Libra and what they think should be done about it, if anything, because this isn’t a matter that one can judge without thorough analysis and consideration as it isn’t clear the sheep wouldn’t be just Blockbuster just as it isn’t clear whether lawmakers would turn a wolf into a tiger nor is it clear whether this wolf can be turned into a sheep by breaking it up or whether it is in fact our dog.