Source: CryptoPotato

This week, two US Congressional committees—the House Financial Services Committee and the Senate Banking Committee—will hold hearings on Facebook's Libra cryptocurrency.

Aside from the slow regulatory response to Bitcoin from agencies including the SEC and FINRA and crypto fraud investigations undertaken by the FTC, the hearings will be the highest profile governmental-oversight measures we've seen to date regarding cryptocurrencies. Yet one danger with the hearings is the potential for committee members to get mired in inaccurate comparisons between Bitcoin and Libra rather than examining the financial and global ripple effects of Facebook's ambitious undertaking.

While both Bitcoin and Libra are crypto assets that can be transacted as digital currencies, that's where the similarities end. It seems that even the President needs a lesson on why lumping the two together does a disservice to both.

....Similarly, Facebook Libra's "virtual currency" will have little standing or dependability. If Facebook and other companies want to become a bank, they must seek a new Banking Charter and become subject to all Banking Regulations, just like other Banks, both National... — Donald J. Trump (@realDonaldTrump) July 12, 2019

A good place to start is this comparison chart from CryptoPotato breaking down the major differences.

From a basic blockchain perspective, Bitcoin is completely decentralized with a vast number of nodes operating worldwide. It's also permissionless; anyone with the hardware and technical knowledge can start mining. The core issue with this from a payments perspective is that it takes too long to validate transactions, which is why Libra is more or less the opposite: It's based on a relatively centralized blockchain governed by the Libra Association to keep transactions fast and scalable, and for the foreseeable future, it'll be permissioned. Only authorized entities can add transactions to the ledger, and the majority of Libra's founding members are tech and financial companies.

How Bitcoin and Libra's values and monetary systems work are also very different. Bitcoin works off a fixed supply of coins created during its inception a decade ago, and its price is not tied to any aspect of the traditional financial system. Libra,, on the other hand, is backed by a basket of fiat currencies and will always have exactly as many coins as its corresponding fiat pool's value. When a user exchanges dollars, euros, pounds, Swiss francs, yen, and so on for Libra, new corresponding assets are created. When they pay or cash out, those tokens are destroyed.

Source: Coin Center

This explainer and the above charts from nonprofit cryptocurrency research and advocacy organization Coin Center goes deeper into the coins' contrasting characteristics. Philosophically, Bitcoin is designed as peer-to-peer electronic cash that doesn't go through any third-parties or financial institutions, whereas Libra's lofty goal of becoming the foundation of a new digital financial system hinges on its 1:1 asset pegging to existing global currencies.

Coin Center likens Bitcoin to a valuable commodity, like gold—possessing some immediately provides value, which jibes with Bitcoin and other popular cryptocurrencies' current primary usage as speculative investment assets rather than daily currency for payments. Conversely, Libra is more like a bank note or security; its value depends on what fiat currency it's backed by and can only be used in peer-to-peer transactions if approved by the backers.

The House Financial Services Committee and Senate Banking Committee should have a laundry list of questions about how Libra works, how consumers will be protected, what oversight and regulations should be put in place, the Libra Association's governance structure and centralization of power, and how Facebook plans to profit off of it all with its new Calibra subsidiary.

What shouldn't happen is a repeat of Mark Zuckerberg's April 2018 congressional hearing, where committee members spent much of their time on basic or irrelevant lines of questioning. Given all the questions that should and must be raised during these hearings, let's hope the committees don't waste their time comparing Bitcoin and Libra.

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