FaceBook Libra Coin, Just as FB Coin like, Games Site Coin, Not Profitable Coin

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FaceBook Libra Coin, Just as FB Coin like, Games Site Coin, Not Profitable Coin

Post by ஆதித்தன் » Tue Jun 25, 2019 7:20 pm

Let's start off by saying that Facebook's new Libra coin (under current proposal) should not be called a stable coin.


A stable coin is one that's pegged to a specific currency, or other asset, in order to reduce volatility and therefore the exchange rate remains similar to that of the asset it is pegged to. What Libra is proposing is actually a new currency with a floating exchange rate.


In fact, the Libra is set to act more like an asset-backed ETF, only with a small twist. Libra holders won't get the profits.


According to the Libra White paper, the Libra Association in Switzerland will be responsible for managing the assets that back the new currency and will receive all the yield from the incoming investments.

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This structure creates a moral hazard for the association members who will be incentivized to seek the maximum yield at any cost.


Last Friday, I alluded to this concept on Twitter just to check the reaction. After seeing this article in the Wall Street Journal yesterday, it seems my fears have been confirmed.

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