❖ The Libra you were promised. The Libra you should have.

The Diem stablecoin (originally Libra) has officially been abandoned and liquidated. After 3 years of work and various re-brandings (of both Facebook and Libra), what could have been the most consequential digital currency since Bitcoin has run out of road. The fate of the project was essentially sealed when Facebook committed to the line that “Libra won’t launch until regulators are satisfied” – so presumably never.

Innovators were taken for a ride, but now innovation can chart its own course. So how is it possible to push forward and ensure nothing stands in the way of progress? Here are the key points:

Hold reserves for stability, but not in fiat

Stablecoins are now commonplace in the crypto space, so there is no need to hold fiat for reserves. Ideally use a DAO-based stablecoin as a reserve asset, since those tied to traditional finance are prone to be underfunded due to lacking transparency (Tether), or failure to be permissionless (USDC). Permissionless remains key to ensuring the system can’t be undercut.

Most stablecoins track the USD, but that does not mean Libra should – in fact, that would be a mistake as it would inherit the same currency debasement. Libra should be its own currency unit, and therefore float relative to its reserve asset. The clean way to do this is following the algorithmic market-making approach, with a predefined curve

Pay interest, without relying on debt

If Libra was a threat to financial stability it’s because the debt based financial system is not sound. A new house is a consumer good not a productive asset, so you shouldn’t expect a return on investment from mortgage lending long term. Same for government debt: mostly used for deficit spending, therefore not a real investment.

The losses of such non-investments in the end get covered by money printing. This makes the money supply of advanced economies grow much faster than their rate of interest. With Libra not being based on debt, this gap could be closed, to have Libra pay much higher interest  – a conservative figure being 6% (based on matching money supply growth rate).

Spread the upside more broadly

The set of Libra Association members was impressive, but ultimately no single one of them had enough at stake compelling them to fight for the project. Buy-in needs to be allowed to disseminate freely, just as other crypto assets have done and are now gaining political clout.

It wouldn’t make sense to issue yet another utility token however. They are toy financial instruments, in that their value is not fundamentally tied to the commercial success of their system. As Libra is effectively operating a bank, it should finance itself in a similar way, namely through interest margin. Even a small fraction of the 6% which will be distributed as interest is substantial when properly accounted for as a recurring cashflow over several years.


Rather than cracking down on some actual fraud, or price manipulation of a trash token, the effort was directed to killing off Libra precisely because it had merit. If you agree the potential which Libra had cannot be left unfulfilled, details of the new system implementing the points above are publicly available.