The Banking Executive Magazine - May 2021

The Rise and Fall of Libra tion was more than the world’s lead- ing economic powers could take. No matter how much Facebook CEO Mark Zuckerberg pleaded for le- niency or fearmongered about China’s efforts to develop a global digital payment system, he could not sway the powers that be. Facebook was forced to retreat. First, the Libra Association started losing key members. When Visa, Master- card, and PayPal left, the writing was on the wall, even though the overall number of members continued to in- crease. To alleviate market and polit- ical concerns, Facebook had to re- nounce its own engagement with the association. Then came the ill-fated renaming from Libra (balance) to Diem (day), which has been tainted by copyright issues. Facebook’s retreat has been less dra- matic: a reshuffling of paperwork and negotiations with a different set of regulators are all it took to decamp to Southern California. Above all, it is risky business to reach for the crown jewel of state sovereignty – in this case, money. If you dare to do so, you should be sure that you and your collaborators are sufficiently in- dependent from the power that is being challenged. And you had bet- ter have the capacity to backstop your own money, lest it crash when its holders seek safety and rush for the exit. Monetary incumbents also can learn from Libra’s fate. In earthly matters, power is always contested and there- fore always temporary. With chal- lengers perpetually waiting in the wings, incumbents that do not learn how to control them will eventually have to yield. the BANKING EXECUTIVE 38 ISSUE 149 MAY 2021