Have you heard? Facebook is coming out with a new cryptocurrency that’s going to usher in a dystopian corporate nightmare and usurp governments around the world?

The Facebook Libra project was announced a few weeks ago but it’s already causing waves in some circles. Below are some objections.

Libra will take money and sell IOUs for some future money.

Yes, this also happens when Amazon (or any business) sells you a gift card. And consider that Amazon gift cards are as good as cash online. This is also true for banks. No, this isn’t manipulating the money supply.

But Libra will invest that money.

Yes, your money doesn’t sit in a vault with your name on it. Nor does your money when you exchange it for an Amazon gift card or hand it over to a bank.

But Libra will make money off your investment.

Yes, it will use interest from your investment to pay itself expenses. That’s how Libra is funding its whole operation. Again, most businesses don’t throw money they receive for goods or services owed in a vault. A bank’s entire business model is a kind of interest rate arbitrage, where they borrow from customers at a low rate (savings accounts) and lend it out at a higher rate (mortgages).

But the investments could go sour.

Yes, also having money in a vault could go sour if inflation occurs. Libra is at least spreading the risk around to a basket of currencies and investments in a transparent way.

Interest on the reserve assets will be used to cover the costs of the system, ensure low transaction fees, pay dividends to investors who provided capital to jumpstart the ecosystem (read “The Libra Association” here), and support further growth and adoption. The rules for allocating interest on the reserve will be set in advance and will be overseen by the Libra Association. Users of Libra do not receive a return from the reserve.

But depending on the asset performance, Libra could end up owing more than its has.

Yes, you’ve discovered fractional reserve banking. But no, Libra does not keep a fractional reserve, instead it practices full reserve in which 100% of the assets are invested in a basket of stable goods. Similarly, it does not promise any exchange rate, so essentially your deposit is a pass through investment on the basket of goods, minus some of the assets interest for operating expenses.

Importantly, the size of the reserve is determined by the size of the balances that users are holding in Libra. Hence, unlike some other cryptocurrencies, supply is not restricted by outside factors. This has the important role of allowing the Libra ecosystem to grow or shrink with demand. It also discourages “runs on the bank” since the typical rationale behind a run is that a coin is only fractionally backed, so users want to get their backing out before others do. With a fully backed coin and a competitive ecosystem of exchanges, it will be possible to convert coins back to fiat at a narrow spread above or below their current value, no matter how many coins are in circulation or how many people have already sold their Libra. The market value of the reserve always supports the value of the fiat currency that users receive if they sell their Libra.

But the Federal Reserve Chairman is worried.

Yes, he is.

Libra raises many serious concerns regarding privacy, money laundering, consumer protection and financial stability

You can’t have both privacy and no money laundering. One generally comes at the expense of the other. Or at least bad actors exploit privacy to launder money. Money laundering is an issue with anything that can be essentially treated as cash, including gift cards. Libra will comply with Know Your Customer (KYC) laws which many cash-like products such as gift cards do not abide by.

Consumer protection and fraud are also two sides of the same coin. Facebook will allow for chargebacks based on some consensus mechanism of its governing companies. There is naturally some discretion applied there. Libra will have to manage the process much like credit card companies manage charge backs and other retailers handle warranties and returns. Financial stability will only be a problem if the underlying group of assets fluctuates or Libra does not abide by its full reserve policy.

But Libra won’t be regulated like a bank.

Yes, and hopefully they won’t be bailed out like a bank. But considering that Libra will be investing in a transparent basket of goods of mostly and treat Libra deposits as a pass through vehicle on these goods, it doesn’t run the risk of a bank run nor does it run a risk of its assets not matching liabilities, assuming they adhere to their full reserve policy.

But I really don’t like Facebook.

Yes, Facebook is a founding member of Libra and will have a non-controlling percentage of the network along with other Libra affiliates.

Once the Libra network launches, Facebook, and its affiliates, will have the same commitments, privileges, and financial obligations as any other Founding Member. As one member among many, Facebook’s role in governance of the association will be equal to that of its peers.

But this won’t solve every problem

Yes, few things would solve every problem. Libra will still be out of reach for some. Libra won’t suddenly convert the world’s less fortunate into middle class consumers. But it will allow billions around the world access to perhaps their first bank like product. Libra could help fight capital controls and open up the world of e-commerce to billions.