A Question of Trust: Facebook Libra as Money in the Economic and Legal Sense

Abstract

This article examines the use of Facebook’s Libra as a substitute for fiat money. It considers Libra’s prospects for success in light of the fact that it purports to substitute trust in a technology for the traditional legal supports that bolster public trust in traditional fiat currencies. The legal doctrines that support fiat currencies do so for the purposes of recognizing the economic functions that money performs and are also meant to support public policies that promote monetary stability, protect consumers and help to enforce anti money laundering statutes. It is argued that Libra will result in unintended challenges for monetary authorities that will subject the world financial system to greater consumer transaction risks, increase systemic risks, and make it more difficult to combat money laundering efforts. The ultimate question is whether the public can place its trust in Facebook and its partners to manage a global currency, or is that trust better placed in the hands of central banks?

Keywords: Facebook Libra, Diem, Cryptocurrency, Distributed Ledgers, Fintech, Money, Payment Systems, AML, Financial Reform