After the US came out strongly against the issuance of Facebook’s digital currency Libra, many believed this trend was dumped forever. Yet, past weeks have shown it is not so. Facebook founder Mark Zuckerberg headed to Switzerland, the financial centre and a leading destination for secret bank accounts.
The development came after the US administration exercised pressure on major international financial institutions to stop their support for the proposed digital currency. Visa, MasterCard, eBay, and Stripe have all withdrawn from the Libra Association, dealing a major blow to Facebook’s plans for a globally distributed cryptocurrency This reflects the fact that these financial services companies while trying to keep pace with rapid changes in the field of digital transactions do not wish to go against market regulators, especially those in Washington. In addition to the US, the G7 has warned of “serious risks” posed by Libra and other digital coins, given the possibility of them being used by rogue states, organised crime syndicates, drug dealers and terrorist organisations.
Tech exerts its clout
All this reflect the many-sided conflict between traditional regulators and the tech companies that have emerged strong over the recent past. The Libra, which Facebook insists on issuing in mid-2020, will definitely set off a disruption in financial transactions. This applies to the transfer of funds as well as payments within the global financial landscape.
Since the global financial crisis of 1929, industrial’s contribution has gradually declined in favour of financial capital, which dominates international transactions and even guides state policies. It also defines and directs development in many countries by using its enormous clout This has led to significant geopolitical changes in many regions.
Losing its grip
This dominant force is facing a real challenge posed by new financial instruments, including cryptocurrencies, which are difficult to control. Unlike conventional financial services, digital transactions will be difficult to monitor in accordance with the policies of the current monetary system, which stands to lose its influence, including dictating state policies and obtain concessions in other areas.
At the same time, the dominance of cryptocurrencies will cause global organisations such as the International Monetary Fund and World Bank to lose part of their influence. They will no longer be able to effectively use the leverage of finance to implement economic policies commensurate with the interests of the prevailing powers.
The world is facing a decisive “conflict” that will last long. It poses a real threat to the capitalist system and which will try to resist by all means to retain the dominance of the past century.
Is it possible? Highly doubtful. Digital-led development has swept all forms of resistance for many reasons. First and foremost is its ease of access and speed of service. This makes acceptance of a digital currency a matter of public interest.
Thus, traditional capital may eventually seek compromises with digital institutions, whether through participating in the progress or through purchasing their assets and restructuring their dominance of monetary transactions. But until then, it will not have the overwhelming power of today.
New and emerging ways will also be part of this process, which means a redistribution of the global financial balance of power.
Dr Mohammad Al Asoomi is a UAE economic expert and specialist in economic and social development in the UAE and the GCC countries.