With Libra, Facebook looks to make a cryptocurrency mainstream

Facebook wants to hold your money in a new currency: what could possibly go wrong?

Hi everyone, welcome back to Plain English. I’m Jeff; JR is the producer; and you are listening to Episode 168 of Plain English, the best podcast for learning English with current events. The full transcript and episode resources can be found at PlainEnglish.com/168.

Coming up on today’s episode: Facebook announced the Libra, its new cryptocurrency that it plans to introduce in 2020. It promises to make money transfers seamless, especially across borders. But will consumers trust the social media giant with their money?

Before we start today, I want to say thank you to one of the people behind the scenes here at Plain English. Many of you use the interactive transcripts online. For those of you who don’t know about them—each episode transcript has about 100 words and phrases translated into Spanish, Portuguese, Chinese, French, Italian, and Japanese. We have translators around the world working on these each and every week, 200 phrases a week. And our Japanese translator, Meg, is moving on to bigger and better things. She has been with us since we introduced Japanese translations over a year ago, so I wanted to take this opportunity to say thank you to Meg and wish her all the best.

Are you part of our email list? I want you on there! I want you getting the extra free resources that JR and I send out with every episode, every Monday and every Thursday. All for free; listen to this: a summary of the episode, links to English articles about the main topic, the song or quote of the week, and a description of one more word of phrase that we used in the episode. PlainEnglish.com/mail . Enough said!

Facebook hopes to bring cryptocurrencies mainstream

If you’ve ever had to send money to a friend or transfer money abroad, you know that banking can sometimes seem stuck in the stone age. Checks still take days to clear, international transfers are expensive and slow, even “instant” transfers between banks can sometimes get held up. What if you could pay anyone in the world, with a tap on your app, and have the money arrive instantly, without worrying about currency conversions, high fees, or delays?

That’s the future that Facebook wants to create with its new cryptocurrency, the Libra, which it announced two weeks ago. In this future, digital wallets will replace checkbooks and making payments will be as simple as sending a message on WhatsApp, which, incidentally, Facebook owns.

Cryptocurrencies have had a wild ride the past few years. Currencies like Bitcoin, Litecoin, and Ethereum promised a super-secure, electronic, instant, and anonymous way to make payments. Best of all, they would be immune from inflation and political machinations of central banks and governments. If you’re worried about the collapse of the global financial system, or if you’re worried that central banks would either confiscate or simply inflate away your savings, then cryptocurrencies have provided a refuge.

But they have never really gone mainstream, insofar as regular consumers haven’t used them for actual transactions. Many currencies, like Bitcoin, have fluctuated wildly in value against traditional currencies. Bitcoin, if you remember, was worth a few hundred dollars per coin for much of its existence. But demand from speculators drove the value up to over $18,000, before it crashed to just $3,000. For people who earn money and make their budgets in any traditional currency, Bitcoin has not been a viable way to make payments because its value has been so volatile. It doesn’t help that most merchants don’t accept Bitcoin as payment.

Enter Facebook, with its 2.4 billion users worldwide. These could be the people needed to seed the new currency and turbocharge its adoption. Facebook wants to be the firm that puts a cryptocurrency in the hands of normal people so that it can be used for day-to-day transactions and transfers. It has signed up some giants of both e-commerce and traditional commerce as supporters and investors: Uber, Lyft, Vodafone, Spotify, PayPal, even MasterCard and Visa, the lords of old-school credit card payments.

Let’s touch on what Facebook promises, and then we can see what the potential drawbacks might be.

The main promise is that users would be free of the delays, fees, and currency fluctuations that make money transfer so cumbersome, so difficult, today. Splitting the bill at a restaurant in the United States is not an easy process today: forget paying a language teacher on the other side of the globe. Facebook wants to make money transfers between individuals and banks as simple as sending a WhatsApp message. Using Libra won’t be free, but it will promise lower fees than banks offer now. Those of us in the developed world with pretty good financial services would stand to benefit; it would be an even bigger advantage to the billions of people without access to a traditional bank account, including people in the developing world.

The other promise is stability. If you live in Argentina, Venezuela, Mexico, Ecuador, Zimbabwe, or if you’re old enough, Brazil, then you might remember periods of very high inflation, in which the value of your savings erodes every day. Facebook’s Libra will be backed by a basket of mature, stable currencies. If you hold all your savings in one currency, then you are putting all your trust in the government of that country to maintain the stability of that currency. But if you have it in a basket of other currencies, then the risk of high inflation in just one country is much lower. Consumers are not taking to Bitcoin, in part for its high volatility. Libra will be an asset-backed currency, so each unit of Libra will correspond to an actual government bond in one of the participating currencies. This will prevent the kind of wild ups and downs that Bitcoin has experienced.

Facebook will offer access to Libra through a new subsidiary, called Calibra, but the currency will allow other institutions, including traditional banks, to develop their own payment wallets for trading in Calibra. Traditional banks may even decide to offer Libra alongside their own products someday.

Those are the benefits. There are some serious drawbacks. Facebook has not exactly been the world’s most careful steward of private information in the last several years. Sure, they made all the required promises about not using or abusing private data, but these are promises that have been repeatedly made and broken by tech companies in the past. The Libra will be governed by an independent nonprofit based in Switzerland; Facebook will be a part of it, but the governing organization will be independent. Still, one has to wonder how independent the nonprofit will be if Facebook is the giant that brings in all the users.

A couple of other issues. One: there is no deposit insurance. In the US and many developed countries, the governments guarantee deposits. If a bank in the United States fails, for example, all deposits in that bank, up to $250,000, are guaranteed by the government. There will be no such guarantee with Libra. And though Facebook promises that the most advanced cryptography techniques will be used, recent experience suggests that cryptocurrencies are not quite as secure as advertised.

I will say this for the Libra and the promise of cryptocurrencies: the creaking, old behemoths of global banking have not served consumers well, with their high fees, long delays, outmoded technology, and abysmal service. Many of the world’s governments have performed no better: Venezuela with it’s million-percent inflation rate is only the most recent example. Innovative new companies like PayTM in India, PayPal in the United States, TransferWise in Europe, and AliPay in China have stepped up where the giant banks have failed. Facebook could be the one that finally brings an electronic currency into the global mainstream—or it could stumble and set back the cause of cryptocurrencies. Time will tell.

I want to send a special hello to Bryan in Brazil. He’s a student and listens to English podcasts. He said that his WhatsApp message to me was the first time he’s interacted with a native English speaker. I personally don’t believe him, since his written and spoken messages were so good. But that’s what he says, so I want to say hi to Bryan.

Secondly, have you ever heard about someone’s job and thought—why didn’t I try to get that job? Well, that’s the reaction I had when I heard what Jacob is going to be doing. Just wait until you hear this. He’s about to move from Poland to Milan, Italy, to study car design. There is no better place to do that than in Italy. Why, why, why did I not realize that was a possibility when I was in school? Ugh, instead I became a business consultant. Oh, well.

If you have not joined our email list yet, you are going to want to do that. I’ve been dropping hints that we have a big announcement coming up. I’m still not authorized to say what it is, but I will be able to soon. However, if you want to be the first to know what we have in store, then you’ll want to be on our email list. And, look, it’s not just for big announcements.