People typically think of money as something that exists mainly to facilitate the buying and selling of goods and services, or current account transactions. But in fact, one of the major uses, if not the major one, is to facilitate debt, investment, and other capital flows, including across national boundaries. Digital money like Libra, in other words, won’t just be used to buy cups of coffee. Unless strictly regulated, its major use will probably be to facilitate capital flows. This has really important implications—both good and bad—that weren’t addressed in the Libra White Paper . The most important one is that as the digital currency is now structured, the more successful Libra is the more it may facilitate destabilizing capital flows.

I have never been terribly knowledgeable about digital and cryptocurrencies (although like most people living in China, I pay for a lot of things with my WeChat app), but I had drinks at my home earlier this week with the very smart Cristian Gil. He is an old friend who at the turn of the decade started a digital-currency trading company called GSR as a hobby, only to watch the firm morph into a serious business. After our interesting discussion on cryptocurrencies, I decided to read up on Facebook’s new digital currency and try to figure out how it might operate….CLICK for complete article