It’s been a busy summer at Monerium. While Facebook was talking about their proposed cryptocurrency and blockchain linked to a basket of fiat currencies, Monerium was issuing fully licensed fiat-denominated e-money on an established blockchain, Ethereum. We’ve been asked several times for our views on Libra. There are already many reviews of Libra in established publications - Coindesk1, The Economist2, The Financial Times3, The New Yorker4, The Nation5, Techcrunch6, The Wall Street Journal7, Wired8 - and by numerous independent contributors. Instead of writing yet another analysis of Libra, we’d like to briefly explain how Monerium e-money is different from Facebook’s proposed Libra cryptocurrency.
Facebook has stated that they are focused on serving the large populations of unbanked individuals, primarily in the emerging markets. They have not explained how this serves the interests of the merchants and others in the Libra Association, or how they will interact with the mobile phone payment apps and other financial services already available to these people.
Monerium works with established financial institutions and e-commerce platforms to make safe, reliable and efficient forms of digital cash available online for e-commerce and securities transactions. The first customers will be announced in 2H of 2019.
Fiat currencies exist for a reason, global and local trade flows within and between currency areas defined and backed by nation-states. Monetary policy goes hand-in-hand with fiscal policy and cultural norms to mitigate the effect of business cycles and financial distress.
The Libra cryptocurrency is backed by a basket of fiat currencies, not individual fiat currencies. It is unclear how the basket will be constructed and for whom.
Unlike Libra, Monerium will issue e-money for each major fiat currency. Customers are, however, able to construct their own currency baskets using our e-money if they so choose. After all, decentralized finance is about unbundling services, not imposing a centralized solution to fit all.
As a fintech that builds on open regulatory and technical standards to support decentralized finance, we share the view of Ripple co-founder Chris Larsen: “The goal isn’t just to rewire finance. It’s to flatten finance.” In other words, we believe in fostering an open ecosystem.
Towards that end, Monerium plans to make its e-money platform available to licensed financial services providers in major jurisdictions, starting in the European Economic Area. The more issuers support e-money, the better for users and issuers.
With high and arbitrary hurdles to membership, Techcrunch described the Libra Association as an “oligarchy”. Libra is a closed club of credit card networks, telecoms companies, bulge bracket venture investors with arbitrary and onerous membership criteria for new members. What interests bring these varied players together and how they promote public trust isn’t explained. We believe Libra is erecting barriers where none need or should exist.
According to the Libra whitepaper, the Libra “blockchain” is a not a blockchain in the strictest sense, but a “decentralized database for tracking programmable resources” which is “currently at the prototype stage”. According to CoinDesk, there is little or nothing fundamentally new in Facebook’s technology, nor is it ready9.
There are many companies and initiatives building great blockchain technology, including Bitcoin, Ethereum, Hyperledger, Ripple, Stellar, Corda and Algorand. Each has the potential to carve out a niche in the marketplace, and many have already been tested and deployed.
Monerium’s focus is to make licensed digital cash available for online transactions. We will support all leading blockchains that subscribe to the ethos of decentralized finance, including Libra if it gains traction as an open and neutral technology platform.
Facebook’s stated goal with Libra is to drive more ads on its own platform:
“If more commerce happens, then more small businesses will sell more on and off platform, and they’ll want to buy more ads on the platform so it will be good for our ads business.10”
Monerium has no conflicting businesses in social media, advertising, messaging, or other sectors.
Monerium is a regulated and supervised e-money provider. Preserving our customers’ privacy is not an afterthought or marketing ploy, it is required by law.
Prior to launch, instead of constructing an ad hoc proposal for issuing a fiat currency proxy on blockchains, Monerium applied for and received a license under a proven legal framework of a major jurisdiction for a “digital alternative to cash”, electronic money as defined by the EU.
We worked with our local regulator to adopt this “technologically neutral” framework to blockchains. Other regulators and international bodies are now also coming to view e-money as a suitable vehicle for issuing fiat tokens on blockchains, including the UK’s Financial Conduct Authority and the International Monetary Fund.
Monerium will work with regulators of the jurisdictions it operates in and seek the appropriate licenses. We will promote standards and practises that we believe make financial services more open, efficient, and reliable. We will not lobby for special considerations from national governments or international regulatory bodies of makeshift proposals tailored to serve our own narrow interests.