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Libra is a Digital Traveler’s Check. That’s all. Time for a thread to right this ship. [1/n]
Many moons ago, it was hard to travel with money. Your bank wasn’t in other locations and currency exchange was hard. [2/n]
So banks innovated with traveler’s checks. You paid money, then a check was made in the denomination you wanted. You could then give it to merchants or banks elsewhere and transact. [3/n]
Traveler’s checks were quite ingenious. en.wikipedia.org/wiki/Traveler%… You signed them when you got them. Then you signed them in front of the merchant/bank. It was proto-public key cryptography. And it worked. I used them when I went to Stanford in 1990. [4/n]
Traveler’s checks were a medium of exchange. They were ‘backed’ by fiat money you used to ‘buy’ them. The check issuer carried the exchange rate risk. [5/n]
So when I see articles like this (voxeu.org/article/libra-…) raising concerns about Libra, I have to remind everyone that Libra is hardly a new concept and has a rationale just like traveler’s checks — to facilitate transactions where your bank isn’t (or you don’t have a bank)[6/n]
Will it facilitate criminal payments? Most likely, precisely because often criminal payments want to be ‘bank free.’ [7/n]
But is it an attractive medium of exchange for criminals? My guess is not. It is more like a traveler’s check (where there is some likelihood transactions and their parties can be traced) than, say, the US dollar which is anonymous. [8/n]
Would a central bank issued cryptocurrency be better than Libra in becoming a digital traveler’s check? Possibly, but would it actually look different from Libra. [8/n]
If you can actually specify how a central bank digital currency would be different from a private one, then that would tell you what regulations you want. That should be the approach to Libra. [9/n]
Right now, there is more hysterics in the debate than clear thought about what the differences are, how new this really is, and if it is an improvement over the long status quo. [n/n]
