Of Libras and Zebras: What Are the True Financial Risks of the Facebook-Led Digital Currency? (Part II: Monopoly Risk)

Policymakers, in America and around the world, have for the most part responded to the announcement of Libra with skepticism, fear, and not a little bit of loathing. In mylast post, I argued that Libra ’s association with Facebook and misleading references to it as a cryptocurrency led to an overreaction on the part of the policy elite. Like budding zoologists who think of zebras rather than horses when they hear hoofbeats, government officials are focusing on the memorable (crisis, monopoly, fr aud) rather than the probable (an improved payments system) consequences of this innovation.My previous post showed that warnings about the systemic risk that Libra presents are overblown. In this post, I explore another concern policymakers have expressed about the Facebook-led digital currency project. That is the risk that Libra-based providers, or even Facebook alone, will be able to monopolize payments through the Libra Association. I hope to show that public officials may be letting their imagination run wild, as they have with regard to systemic risk. In fact, Libra appears more likely to increase competition and choice in payments. Such an outcome is not a best-case scenario, but rather what one might expect based on the experience of payment card networks.Monopoly riskFacebook isthe world ’s largest social media network and thefourth most valuable publicly listed firm in the United States. In recent years, it has acquired two of the most promising social media apps, Insta...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs