Facebook Globalcoin and what it means for the cryptocurrency market and the world.

I have been receiving a lot of questions from our team, artists’, and community about the new Facebook GlobalCoin. As a lifelong learner of advanced economics and a former banker and fiduciary, I feel I must share my thoughts and rationale for the sake of ethics and of clarity for others. I don’t want people to be confused or mislead. So here are my responses to some of the most asked questions I’ve received regarding the Facebook GlobalCoin (aka Project Libra).

Q: What is FB GlobalCoin?

A: A centralized online bank with a digitally represented asset for payment transactions.

Q: Will FB Project Libra (aka GlobalCoin) be a threat to Bitcoin and other cryptocurrencies?

A: No, not at the moment, but possibly indirectly in the future, time will tell.

Q: Is FB GlobalCoin a true cryptocurrency?

A: No, it is only a digital asset, built on a permissioned blockchain. It is not a sovereign-resistant cryptocurrency.

From a cryptocurrency purist perspective, we all know that FB GlobalCoin is NOT a public open cryptocurrency because it lacks the fundamental characteristics. It is NOT: (1) Open, (2) Public, (3) Neutral, (4) Borderless and (5) Censorship resistant.

However, FB GlobalCoin has the potential to become a global online global bank that acts as a powerful intermediary to cross border banking transactions.

GlobalCoin can’t be censorship resistant because FB is legally required to prevent the transmission of funds to certain entities (e.g. sanctioned countries or individuals). It is a centralized money transmission system which is required by law to censor certain transactions. Even if you discount the lack of public confidence in trusting FB with personal data, I struggle to see why GlobalCoin needs to be on a blockchain other than for marketing and PR purposes.

If you’re prohibited from sending money to certain countries and/or individuals then you can’t be borderless, which means you have to be able to identify both who is receiving the money and their location. To verify who and where the recipient is you have to follow and comply with KYC and AML financing protocols and regulations. Anyone who implements a payments system that is centralized has to follow all the rules of a money transmitter, which makes them a de facto Bank, which means you are NOT neutral.

Thus, the GlobalCoin protocol is NOT neutral because FB must be involved with knowing and mediating the sender, the recipient, and the value of the transaction. Neutral protocols do NOT care who you are, where you are and what value you’re transacting. Moreover, all banks, including FB must ask questions to verify and identify the foregoing information. This applies across the world and every jurisdiction has its own rules and regulations, which means FB GlobalCoin is NOT borderless.

Facebook does operate in a borderless way with some aspects of its business. However, this is costly, challenging, and often results in the company being blocked and banned in many countries. With respect to Globalcoin, for FB to attempt to comply with payment regulations for 2 billion customers distributed across more than 194 countries; this is an uphill and costly multi-front war that is not winnable in my humble opinion. Case in point, PayPal is a global brand and de facto bank, but in reality, it can only serve 30 countries due to regulatory restrictions and having to remain compliant within these jurisdictions to my understanding.

Although FB GlobalCoin is not a cryptocurrency, it has the potential to become a powerful centralized online bank, distributing digital assets, with a huge multinational footprint. From a pure disruption perspective, banks and the entire financial world should be very concerned. You can easily see the power that Alipay has in China processing mobile payments to understand why FB wants to diversify its business model into online banking.

Even though FB can’t be as open, as borderless, as neutral, as censorship resistant as a true cryptocurrency — they can certainly be more open, more borderless and reach more countries than other banks. FB also presents a potential threat to some authoritarian regimes.

FB GlobalCoin can also affect central banks, especially central banks in countries that have greater corruption and a higher propensity towards inflation. This does affect fiat currencies because they will force banks to essentially modernize. Perhaps in the future incumbent banks will compete against FB as a global online bank, leveraging the very best software and technology, and a global brand that reaches billions of users.

So, when you envision that metaphorical “sliding scale of decentralization” — the left being fully centralized and the right being fully decentralized — FB Globalcoin pushes that scale towards decentralization when you compare it to the existing offerings of central banking. Naturally, it misses the mark as being a true cryptocurrency for all the reasons mentioned.

However, from a product, technology, and investor lens my view is that from a pure disintermediation perspective, FB GlobalCoin might have a good chance at disrupting the banking sector in the long run.

In addition, if they achieve a modicum of their goals FB will be positioned as a leading intermediary for digital assets. They could enable the exchange of other forms of digital assets (including true cryptocurrencies) if they control a large block of global consumers who are regularly holding and transacting in GlobalCoin.

Regardless of my personal opinion on him, I have to give props to Zuckerberg and his team for their strategy. One cannot question their ambition, audacity, vision and technical potential to actually achieve their goals. This strategy assumes the public will go along with their plans even though they have been deceived in the past by the FB surveillance and data mining business model. Rationally, we have to ask ourselves, will people trust them so soon? What has FB done to try to prove itself trustworthy since then?

It will likely raise the tide of global awareness for crypto and generate demand across the board for cryptocurrencies. It has the potential to disintermediate the entire banking industry. Facebook is very good at being an intermediary (toll booth collector). They know that their golden goose of monetizing personal data via social media is threatened and may one day become extinct. I believe they view this emergent shift to a pure digital economy (powered by blockchain technology) as a ripe opportunity to leverage their dominant position, surveillance technology, engineering talent, and channel power to forward integrate and become the leading toll booth collector in the digital age. They have a reasonable shot at achieving this goal unless someone stops them.

I have other more political views on the underlying motivations for FB to launch GlobalCoin that are much less optimistic. The short story is that FB GlobalCoin is cloaked under the guise of “banking the unbanked” 4 billion underprivileged citizens of the planet. However, FB’s true intentions (per the reality of what has happened regardless of what they say or testify) have always been about aggregating as much personal data as possible so they can leverage and control the distribution of the value that this data represents, which is in conflict with the true spirit of blockchain. Blockchain was designed to enable individual sovereignty and ownership of one’s data regardless of the platform or networks that the data flows through.

Originally published at https://atogallery.com/article/carrie-eldridge's-thoughts-on-facebook-globalchain,-aka-project-libra