Rohit Chopra, Commissioner of the Federal Trade Commission (FTC), has written an open letter to Federal Reserve chairman Jerome Powell to launch their real-time payments system, FedNow, at the earliest to curb megabank monopolies and private sector abuse, November 7, 2019.
Public Sector Curbing Libra
It goes without saying that a public sector version of Libra launched by a government undertaking would be much more leniently regulated and easily integrated into the financial system.
However, by now it is clear that true innovation comes from the public sector, and governments ride on their tail to absorb the benefits. Acknowledging this scenario, Chopra urges the Federal Reserve to launch FedNow, but this is likely to take till 2023 at the earliest.
According to Chopra, the private sector has not been able to meaningfully meet the need for faster payments, and this has opened the door for projects like Libra to reinforce new standards in the payment space. Commissioner Chopra says this as though Facebook itself is not a private sector entity.
He goes on to detail Facebook’s poor track record in the realm of data management and the lack of disclosures regarding Libra. In all fairness, information regarding Libra and the consortium’s plans are scanty at best. But maybe it wouldn’t be this way if Congress actually asked Mark Zuckerberg questions about Libra, instead of hounding him about the social environment at Facebook.
Public vs Private Monopolies
Essentially, Commissioner Chopra’s argument is to stop a private payment monopoly by creating a public sector monopoly. This would, obviously, bode well with bureaucrats and any elected representative, but does it meaningfully change the end result?
A monopoly is a monopoly, but the government has always believed they are more capable of running things despite historical evidence standing against them. Of course, for the most part, their intent is in the right place, but private monopolies have also been governed well.
Payments, in particular, is a retail focused segment as banks aren’t riddled by the same liquidity issues that the common man faces.
FedNow taking 4 years to launch versus Libra’s proposed one-year deadline is a testament to the private sector’s ability to streamline things. The advent of PayPal and Stripe have revolutionized payments. Using Libra as an excuse to impose a public monopoly over an entire sector is unjustified.