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Is Facebook trying to replace the IMF?

Headlines everywhere are filled with talk of Facebook’s innovative new cryptocurrency Libra but is all the excitement really worth it? Let’s take a careful look.

First of all the idea of pegging a currency to a basket of other major currencies is not new. The IMF has used the concept since 1969 when they invented Special Drawing Rights (SDRs) and gave it the currency code XDR. Originally SDRs were designed to help with reserves during Bretton Woods system, a system that pegged the dollar to a fixed amount of gold and with other global currencies pegged to the dollar. In the original basket of currencies, gold was included. Today the SDR currency basket is composed as follows:

It stands to reason that Facebook’s new Libra will most likely look pretty similar. So did Facebook invent something new or are they just copying the IMF? The more important question is whether or not a basket of currencies has ever been or ever will be effective. In our opinion a basket of currencies should not be conflated with stability anymore than a basket of stocks especially if there are strong similarities amongst the currencies.

Today’s current XDR and Facebook’s Libra rely 100% on fiat currencies that are backed by nothing but governments that are in debt up to their eyeballs. That’s one of the reasons our team at Hash Labs is so passionate about our digital payment platform Coro which will allow users to transact in gold as conveniently as any fiat currency. Take a look at how well the IMF special drawing rights (XDR) have held up against gold (XAU).

The special drawing rights have lost more than 83% of their value against gold just since the last tech bubble. It is also our belief that we are about to see the burst of the current tech bubble, which ironically includes Facebook.

And speaking of copying, Facebook has made a big deal out of their governance model which looks a lot like that of Hedera Hashgraph, so much so that our colleagues at Hedera Hashgraph decided to run a full page ad in the Wall Street Journal.

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