The other side of the Coin: Risks of the Libra Blockchain

TL;DR

This paper provides a comprehensive analysis of the Libra blockchain project, highlighting its governance, potential risks across political, financial, and ethical domains, and discussing regulatory challenges and future implications with CBDCs.

Contribution

It offers a holistic view of Libra's implementation, governance structure, and the multifaceted risks, emphasizing the regulatory complexities and future prospects of similar projects.

Findings

Libra's governance involves multi-level structures for the Association and Blockchain.

The project poses significant sovereignty and regulatory challenges across countries.

Emergence of Central Bank Digital Currencies may influence future blockchain projects.

Abstract

Libra was presented as a cryptocurrency on June 18, 2019 by Facebook. On the same day, Facebook announced plans for Calibra, a subsidiary in charge of the development of an electronic wallet and financial services. In view of the primary risk of sovereignty posed by the creation of Libra, regulators and Central Banks quickly took very clear positions against the project and expressed a lot of questions focusing on regulation aspects and national sovereignty. The purpose of this paper is to provide a holistic analysis of the project encompassing several aspects of its implementation and the issues it raises. We address a set of questions that are part of the cryptocurrency environment and blockchain technology that support the Libra project. We describe the governance of the project based on two levels, one for the Association and the other for the Libra Blockchain. We identify the main risks considering at the same time political, financial, economic, technological and ethical risks. We emphasize the difficulty to regulate such a project as it will depend on several countries whose legislations are very different. Finally, the future of this kind of projects is discussed through the emergence of Central Bank Digital Currencies.