Tue. Nov 12th, 2019

How long will it take the banks to copy the pound of Facebook?

The president of the Federal Reserve of EE. US, Jerome Powell, has stood up to the digital currency plan of Facebook, Libra, becoming the first sword against the project that has been questioned by organizations such as the Bank for International Settlements.

The director of the Postgraduate Blockchain and other DLT technologies of the BSM, the management school of the UPF, Luz Parrondo, considers that the BPI is not impartial, which does not mean that its arguments are not reasonable and notes that "the banks are also analyzing their own stablecoin like Facebook". Libra is a currency backed by an asset reserve designed to give it intrinsic value, so it does not have bitcoin volatility and can be used to make international bank transfers at a much lower cost, with more transparency and more quickly.

Parrondo argues that the great problem of cryptocurrencies In general, and Libra in particular, it is based on trust. Paradoxically, Blockchain was born to repair the lack of confidence generated by the financial crises of 2008, decentralized the validation of transactions and disconnected the trust of a centralized body to transfer it to technology.

"The blockchain technology it has the ability to decentralize ownership and decision making, so trust is assured by technology and not by an institution. " But this ability is distorted when the network, as in the case of Facebook, is not public.

"In the case of the Libra private network, our trust has to be deposited again in a single agency, Facebook and this is not different from other technologies such as PayPal or Visa. On the other side there are two important differences. One, blockchain allows transfers at a lower cost, greater security and greater traceability and transparency. And two, Libra, at least for the time being, is not as regulated as traditional technologies and systems "remarks.

In this sense Parrondo emphasizes that when the issuance of stablecoins, such as Libra, is done from a large company, whether it is Facebook, Alibaba or Amazon, it moves away from the government control and from the banking regulators, and insists that the user has to Deposit your trust in the company and not in the decentralization of blockchain.

"Facebook wants to send the message that it has created a centralized but decentralized system at the same time, and in this context has chosen Switzerland as the seat of this network, a symbol of neutral territory." And Mark Zuckerberg himself on his Facebook page, announced the creation, along with 28 entities, of the Libra Association, a nonprofit organization that will be responsible for regulating a new currency.

Parrondo considers that despite the fact that the creation of Libra is good news for the Blockchain community, public networks that are capable of placing the user in the center must also be strengthened. He also believes that "we must create an instrument that regulates the implementation of public blockchains that facilitate peer-to-peer models to reduce the concentration of power, whether in banks or in large technology," he says.

"Libra helps open the market, reduces the banking monopoly generating more competition and that is always favorable for the user. It has to open the money transfer market to compete with the big technology, "he says. "The reality is that if the technology does not go hand in hand with someone as strong as banks, Facebook or Alibaba can hardly, at least initially, be adopted massively. In order for real decentralization to exist, the responsibility has to be transferred from the institutions to the users, and in my opinion we are neither willing nor prepared for it. That Facebook has done it is a great advance for a massive implementation, but now it is up to us to be able to regulate it so that it does not go towards a hyperconcentration of power but on the contrary, to palliate this concentration as much as possible. This task will not be easy, "he says.

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