Facebook announced Libra on June 18th, 2019. Libra is a digital currency managed by the Libra Association, an independent organization that's controlled by a consortium of companies and organizations. Members of the association, which includes renowned companies like Visa, Uber, Andreesen Horowitz, and of course, Facebook, will each have a single vote in Libra's governance. Libra is intended to be a stable currency backed by a basket of international currencies that, ideally, can be used in transactions between anyone in the world. For Facebook, this means integrating Libra payments into its social media applications (e.g. WhatsApp). Imagine a fisherman in Sri Lanka buying a watch from a watchmaker in Argentina using Libra. Without having to convert currencies, the transaction would be cheap and instant.
Libra was quickly deemed Facebook's "cryptocurrency" upon its announcement (e.g. TechCrunch's article on the Libra announcement was titled: "Facebook announces Libra cryptocurrency: All you need to know"). On surface examination, Libra is very similar to a cryptocurrency. It's digital, a currency, and managed by a foundation based in Switzerland. Unfortunately, the similarities stop there. Libra is not a cryptocurrency and here's why.
In its purest form, a cryptocurrency is a ledger controlled by the public through a specialized distributed systems consensus algorithm. The consensus algorithm does two things: (1) it incentivizes the continuous publishing of transactions to the ledger and (2) it protects the ledger from being corrupted by malicious entities. A cryptocurrency is public and thus its consensus algorithm needs to be resilient and open. Anyone can join and leave the consensus process at any time without affecting the consistency of the ledger. Theoretically, this enables an asset to exist on the Internet that cannot be duplicated or destroyed at whim by any individual. Practically, Bitcoin has demonstrated, for the past 11 years, that this idea is feasible. One of the most attractive and libertarian properties of Bitcoin is that it cannot be inflated on a whim by central banks as a short term solution to monetary mismanagement by governments.
Libra doesn't try to do any of these things. The essence of Libra is a global currency that enables companies to provide seamless cross-border payments and simplify their finances by eliminating currency conversions. As such, Libra needs to be stable (backed by a basket of international currencies), fairly but exclusively governed (Libra Association controlled by a consortium of companies and organizations), and fast (doesn't have an open consensus algorithm).
Libra is a corporate instrument to introduce an international currency (similar to the euro for the Eurozone) to streamline cross-border business processes.
This is also why Libra is so unpalatable to sovereign governments. A nation losing control of its currency is akin to losing its sovereignty. The perfect example is Greece in the Eurozone. When Greece shed the drachma and adopted the euro, the country fell under the control of the European Central Bank. Instead of inflating its currency to pay for its national expenses, which it cannot do because the ECB controlled the euro, it had to keep borrowing euros from its forever creditor, the ECB. Greece also didn't have the option to devalue it's currency to increase exports, which would allow it to pay off its debts. Because Greece used a currency it doesn't control, it had to endure a massive national debt and persistent trade deficits.
A global currency controlled by a consortium of companies threatens to take sovereignty away from nation states by providing an alternative to national currencies. If a nation's debt is not denominated in its national currency but in Libra, then the nation has very few options to control the debt, resulting in serious economic consequences.
This is especially bad for the United States, which relies on the US dollar as the world's reserve currency to maintain it's economic and military hegemony. Last week, Trump tweeted that he could "obliterate the Economy of Turkey". In 2018, the lira's inflation rate soared to 25% from 10%, partly because oil is denominated in the US dollar and Turkey's debts are also denominated in the US dollar, giving the US significant influence in the lira's inflation rate.
It's no surprise that US and Eurozone government officials have rallied against Libra. On July 11th, Trump tweeted:
....Similarly, Facebook Libra’s “virtual currency” will have little standing or dependability. If Facebook and other companies want to become a bank, they must seek a new Banking Charter and become subject to all Banking Regulations, just like other Banks, both National and International. We have only one real currency in the USA, and it is stronger than ever, both dependable and reliable. It is by far the most dominant currency anywhere in the World, and it will always stay that way. It is called the United States Dollar! https://twitter.com/realdonaldtrump/status/1149472284702208000
On October 30th, CoinTelegraph reported that 5 Eurozone countries (France, Germany, Italy, Spain, and the Netherlands) have teamed up to prevent Libra from launching in Europe. Although the group cannot legally prevent Libra from launching, implementing such a law is not out of the question.
Libra is not a cryptocurrency. On first impression, it can be mistaken for one because of a few surface-level similarities but the similarities stop there. Libra serves a completely different purpose than most cryptocurrencies; instead of a deflationary asset with a ledger that's transparent and purely publicly managed, Libra is a tool for multinational corporations to simplify cross-border business processes and side step nation states (the biggest impediment to a multinational corporation's operations after geography). The reductionist claim is that Libra is the next step in the slow and unfortunate transfer of power from nation states to multinational corporations.