Libra’s Vice-Chair Says Blockchain is Key While Ex-IMF Economist Criticizes the New Whitepaper
Facebook led, Libra Association, recently updated its whitepaper for proposed stablecoins, and has since attracted several opinions from internal and external stakeholders. This was, however, expected given the project’s threat to existing financial ecosystems and the possibility of tapping into Facebook’s market with ease.
Blockchain is Key in Libra’s Development
Libra Association Vice Chair, Dante Disparte, now says blockchain tech remains the fundamental of its prospective stablecoins. Speaking in an interview with central banking on April 28, the Libra VC emphasized that a distributed ledger network has always been at the core development, saying:
“We remain very committed to blockchain architecture as a distributed ledger technology for this project. Without it, the project doesn't achieve many of the efficiencies: the low-cost structure and interoperability that it's being designed to achieve.”
Notably, Dante further highlighted that Libra’s real breakthrough would be the creation of value through protocol transfers. This, therefore, means that the project’s cutting edge is facilitating the communication of different networks through blockchain tech. According to Disparte, prioritizing blockchain integration will consequently solve the current ecosystem challenges such as being locked out by a digital wallet provider.
Libra’s New Emergency Protocol Belongs to the 19th Century
Meanwhile, the new whitepaper was criticized by a former IMF policy advisor & American economist, Barry Eichengreen, and Warwick Business school assistant prof, Ganesh Viswanath. who cited that the proposed emergency protocols are like those used back in the 19th Century. According to the publication, Libra’s lack of clarity on the Fed’s intervention as a lender of last resort while empowering network operators to issue ‘redemption stays’ is outdated,
“Financial historians will recognize these devices for what they are. They resemble the clearinghouse certificates issued by bank groups in the U.S. in the 19th century in response to bank runs and financial crises,”
In the new proposal, Libra shifted away from a basket of fiat currencies towards single currency backed stablecoins. Eichengreen, however, says this is likely to create more problems if for instance the LibraUSD is adopted in a certain jurisdiction to a level where its central bank’s monetary policy is no longer effective,
“If residents of another country shift into LibraUSD, that country’s central bank will lose the ability to earn seigniorage. It will lose control of monetary conditions. It will lose the ability to backstop local financial markets.”