The first confusion arose from the name. Facebook called Libra a cryptocurrency, raising fears that it would be as volatile and sclerotic as Bitcoin.
Given that Libra is largely centralised, with an entry fee of $10m, you could argue whether it is technically cryptocurrency at all – but it is certainly nothing like Bitcoin. Nothing to see there.
The second confusion arose from Facebook’s presentation. To hear its representatives speak, Libra was designed solely to help the 1.7 billion people who don’t have access to banking services – in particular, to help them send money abroad quickly at low cost.
In truth, if Facebook really wanted to solve this problem in the simplest way, it could advertise any one of the dozen or so apps already providing this exact service, such as Azimo, Revolut or Transferwise.
Those apps didn’t get much of a mention in the various announcements today, but they will be extremely worried about this news, as will major financial institutions, all the way from Barclays to Visa.
Not because Facebook is doing anything so innovative: it’s effectively reinvented PayPal, only with Facebook Pounds instead of regular ones.
But because it’s on Facebook, the world’s biggest social network, and also the company which owns WhatsApp and Instagram.
The place where people spend vast amounts of their time just got a “send money” button. That’s an incredibly significant fact.
Facebook’s vast size is especially important in the developing world, where most of the so-called unbanked reside.
Of course the devil is in the detail, but if Libra works well and is secure, it’s hard to see how it won’t end up being a huge success in these regions. If you look at volume of transactions, it could very easily become the largest retail bank in the world – and that’s just on day one.
From there, Libra could easily expand into small transactions, which the fees of Visa and Mastercard make costly. Or into SME financing. Or into loans. Start taking a chunk of those markets and being the largest retail bank in the world will rapidly look like peanuts.
All because it’s on Facebook – which is also the reason Libra should be regarded with a healthy degree of scepticism.
Not because of Facebook’s past failures (remember the Facebook phone or the facebook.com email addresses?), although there is a possibility it might not succeed. But because of Facebook’s past record.
Will Facebook be able to resist joining up its financial data and its advertising data? Will it be able to clamp down on money laundering any more effectively than it has stamped out fake news? Is it fair for Facebook to leverage its dominance in one market to move so forcefully into another?
This is just the start of a long list of questions, many of which will only be answered in the fullness of time.
But to me the biggest concern has to be the safety of the global financial system. Until now, currencies have, almost entirely, been controlled by governments. Now, a company is launching a global alternative. This is not necessarily bad, but it is definitely new, and the global governance system is not well-equipped to handle novelty.
Facebook has already changed the world once. Are we ready for it do it again?