On Thursday night, President Donald Trump claimed via Twitter that he’s “not a fan” of cryptocurrencies, which he says aren’t real money. In particular, he singled out Facebook’s yet-to-be-minted Libra, arguing that Zuckerberg & Co. should have to seek out a banking charter prior to the coin’s launch.
“Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity,” Trump said in a series of tweets.
“If Facebook and other companies want to become a bank, they must seek a new Banking Charter and become subject to all Banking Regulations.”
The recent comments from the President adds his name to a growing list of Libra critics, including the likes of Federal Reserve Chairman Jerome Powell, Bank of England Governor Mark Carney, French Finance Minister Bruno Le Maire, and other central bank leaders.
But the Libra wasn’t the only crypto to draw Trump’s ire. He also commented on the first and most popular digital currency, Bitcoin.
“I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air.”
And even though it might pain crypto bulls to hear it, Trump is right – Bitcoin has yet to achieve widespread adoption as currency, and for the most part, its value is speculative in nature.
In other words, Bitcoin is valuable because it’s valuable, acting in many ways like “digital gold” – making it more of an asset than simply “money”, as the President said.
Its value fluctuates greatly from day to day, and for that reason, crypto critics have argued that it would make a poor payment option.
And in this case, they’re correct. As it stands, Bitcoin doesn’t really bring anything to the table as a currency. Instead, investors have shown that they enjoy using it as a method to store value.
Facebook’s Libra, on the other hand, won’t be changing in value over time. Unlike Bitcoin, the Libra is planned as a “stablecoin”, meaning its valuation will be likely be pegged to a real world currency, like the dollar.
Still, even if it does have a 1-to-1 relationship to the dollar, the Libra could potentially have some destabilizing properties. So, it’s no surprise to see world leaders (along with central bank chiefs) grow concerned over what the long term effects of it could be.
In many ways, the Libra will allow people to use their Facebook accounts as mini-banks, possibly eliminating our dependence on physical, fiat currencies over time. This could have an unintended, potentially detrimental impact on foreign exchange rates and in particular, the financial institutions of the world.
So, it makes sense to see Trump err on the side of caution when it comes to a new, paradigm shifting digital currency. Especially since he, the President, should be the world’s biggest cheerleader of the U.S. dollar.
And if regulators do get their hands on the Libra, or at the very least, force Facebook to apply for a banking charter, it might end up being for the best.
After all, Facebook hasn’t exactly been known to make user privacy a priority. Just imagine the backlash if Libra holders find out that Zuckerberg’s been selling their financial information.
The whole situation is something that, if not handled properly by Facebook, could set the crypto industry back in a major way.
Even if the Libra has as much in common with Bitcoin as Trump does with Bernie Sanders, relatively speaking.