Last year when Facebook officials have been dragged to Congress to defend their plans for a cryptocurrency called Libra, they came up with an argument for financial inclusion. With Libra, people all over the world would have access to a common payment network, they said, whether or not they had access to a bank. All it needed was a phone and a Facebook account.
Representative Rashida Tlaib (D-Michigan), a member of the “brigade” of first-term progressive lawmakers, had heard similar speeches before. Its district of Detroit, the third poorest in the country, is populated by the highly unbanked people that Facebook executives described. In the past they had been promised faster tax returns, paycheck advances, or check cashing without a current account. But these offers were accompanied by little regulation and often excessive fees or interest rates. Now here is Libra, a cryptocurrency that also looked like it was on the verge of breaking through regulatory cracks, backed by an industry with a lot of power and data. She wondered if this was the next iteration.
“People don’t realize this is going to happen. I feel like a mom bear, and I have to be careful what will happen to my neighborhood and my neighborhood, ”Tlaib says. That’s why she wants to tell you about a thing called stablecoins.
Unfamiliar? Glassy eyes? It’s a bit of a niche, for now. Stablecoins are a form of digital currency that, as the name suggests, has constant value. This is what Libra is technically, but there are plenty of other flavors. Stablecoins can be backed by real currency or a basket of assets, or they can use algorithmic tricks to stay stable, but the point is that their price, for example, in dollars, doesn’t change. It is a promise. Stablecoins were originally used to help buy and sell volatile cryptocurrencies like Bitcoin. But increasingly, some stablecoins, like Libra, have been offered for more common uses, like paying for real things. That’s because they can be fast, easy to use on phones, and they’re, well, stable.
The problem is, stablecoins aren’t much more familiar to members of Congress and regulators than they are to you and me. During last year’s Facebook hearings, everyone seemed to want Libra regulated, but the unanswered question was how. So this week Tlaib presented a bill, co-sponsored by Representatives Stephen Lynch (D – Massachusetts) and Chuy Garcia (D – Illinois), which offers a possible solution: demand stable coins that promise a fixed value in US dollars to be issued by banks. This, according to lawmakers, constitutes the acceptance of a deposit, which only banks can do – not tech companies or the associations they have created to issue coins on their behalf.
This logic is aimed squarely at Facebook’s stable plans. This year, as we worried about social distancing and reproductive values, Libra has seen some major changes. Instead of a world borderless coin backed by a number of currencies and assets, it is now offered as a series of coins for different locations: a coin for Europe denominated in euros, a coin for the United States. United denominated in dollars, etc. This relieved central bankers who feared Facebook’s currency would compete with their ability to control the local money supply. Libra also ditched a plan to allow anyone to create services on its network, a feature that raised money laundering concerns, in favor of a closed system controlled by its official members.
Oh, and there were a few name changes along the way. Facebook’s Calibra division, which designs the company’s Libra wallet, now wants to be called Novi. And earlier this week, Libra itself – both the currency and the association that issues it – became Diem. It’s understood? Novi treats Diem. Think of it as an effort to assert the project’s independence from Facebook – although, as a reminder, the company had the idea, built most of the technology, set up the association with close allies and will probably provide the most users by far for any coins that may be issued.