If you’re fed up about reading news regarding Facebook’s sortie into crypto, I’m sorry. But, a Nobel Prize-winning economist recently came out to bash Libra, giving a clear “thumbs down” to the Silicon Valley- and Wall Street-backed digital asset. The economist is also known for being a staunch critic of Bitcoin and “real” cryptocurrencies, seemingly finding it hard to apply textbook concepts to this nascent asset class.
From Bitcoin Hater to Libra Cynic
On Tuesday, Joseph E. Stiglitz, a Nobel laureate in economics and a professor at Columbia, absolutely laid into Facebook, Libra, and “some of its corporate allies.” The economist made his views known via a scathing op-ed posted to Project Syndicate. Well, what was his argument?
Simply put, the prominent economist believes that the current financial system is already in good shape, and doesn’t need the introduction of a blockchain, cryptocurrency, or interconnected web of financial data to improve business and commerce.
In fact, he quips that major fiat monies, like the United States Dollar, are “remarkably stable” and useful, making it illogical to try something new with Libra. This is likely a rebuttal to those remarking that the Facebook-backed token is much like a new sovereign currency, used by corporations worth billions and with a user base of billions.
Stiglitz goes on to say that the “last thing we need is a new vehicle” for money laundering, the purchase of illicit goods, and terrorist financing. The cryptocurrency cynic obviously believes Libra will be used to do just that, but the white paper for the cryptocurrency and David Marcus of Facebook have made it clear that this is unlikely to be the case. In closing, he wrote:
“[I]n just a few short years, Facebook has earned a level of distrust that took the banking sector much longer to achieve. Time and again, Facebook’s leaders, faced with a choice between money and honoring their promises, have grabbed the money. And nothing could be more about money than creating a new currency.”
As hinted at earlier, Stiglitz’s tirade against Libra comes shortly after he revealed his thoughts on Bitcoin. During a CNBC interview published in May, he advised regulators to “shut down the cryptocurrencies.” Like in the aforementioned op-ed article, the economist explained that he doesn’t like currencies like Bitcoin due to the fact they are unregulated, unnecessary, and are supposed to be mediums for illicit activity.
Stiglitz in Good Company
It is important to note that Stiglitz joins is in good company in the “anti-Libra camp”, but for different reasons than his peers. Most taking issue with Libra don’t see it as a way to bypass finance. Instead, these skeptics see it as a way for corporations to gather data, even more than what’s already out there, and a way for Facebook to establish somewhat of a monopoly on everything and anything. As reported by this outlet previously, Ethereum’s Joseph Lubin wrote:
“Yet, with the Libra whitepaper, Facebook is not eliminating subjective trust, but imploring us to trust in Libra. You have to trust that one Libra coin will have “intrinsic value” by being backed by a basket of currencies and government bonds, rather than the capriciousness of daily cryptocurrency price swings.”
There may be a silver lining though: cryptocurrency enthusiasts, such as Arthur Hayes and Andreas Antonopoulos, believe that Libra has the ability to render traditional banks useless. For most embroiled in the Bitcoin space, competition on Wall Street is what they want to see, as with more competition in finance comes the possibility that cryptocurrency-related startups and ecosystems can make a mark.