How Not to Launch a Digital Currency
The story of Facebook's failed effort to launch a global digital currency and payment system is reminiscent of the historic struggle between secular and religious authorities. One clear lesson for other monetary aspirants is that it is risky business to reach for the crown jewel of state sovereignty.
NEW YORK – In June 2019, Facebook made a daring announcement: within a year, it would launch a new global currency, the Libra. The idea was to offer an alternative to national currencies in cross-border transactions, and to provide a payment network for billions of unbanked people. A strictly digital token, the Libra was to be issued by an association in Switzerland and backed by a basket of national currencies, implying that its creators sought independence from sovereign powers.
But Facebook soon lowered its sights. Libra has since been renamed Diem, and the issuing entity has moved from Switzerland to the United States, where it has formed a partnership with Silvergate Bank to issue a token that complies with US banking regulations. A project that began by taking its name from a Roman currency and wrapping itself in the image of Caesar Augustus has ended as part of an online financial-services platform based in a corporate office park in La Jolla.
Libra’s quick rise and fall is a telltale case of a premature and ill-designed attempt to challenge the powers that be. Among other things, its fate highlights the critical importance of building coalitions that are willing and able to play both offense and defense against challengers.