Unlike other cryptocurrencies,which have no intrinsic value and are therefore volatile,Libra would be backed by a basket of securities in a range of fiat currencies. As individuals buy Libra the Facebook consortium will acquire a matching amount of securities,reversing that process when Libras are being redeemed.

That means the value of Libras will be relatively stable,although because they will be backed by assets denominated in a small number of major currencies,they might fluctuate significantly relatively to individual fiat currencies.

Initially,at least,Facebook is presenting Libra as an unregulated or"shadow"payment system that would be more efficient and timely than the fragmented range of existing payments platforms.

Those platforms are fragmented,and less efficient than perhaps they could be,because they are regulated at a nation-state level and their core participants are intensely-regulated financial institutions,with prudential requirements and other costly imposts like compliance with anti-money laundering,consumer protection and privacy laws.

Facebook’s Libra could materially reduce the friction costs of payments,particularly cross-border transactions,if it could avoid those expensive webs of regulation.

Given that the earnings on the assets that will back the issuance of Libra will,unlike the interest on bank deposits,ultimately flow to Facebook and its partners that regulatory arbitrage – the arbitrage between regulation and no regulation,or even just less regulation – could be highly profitable.

Facebook says it is initially targeting the 1.7 billion people who don’t have access to banking services,largely in developing economies. Its ambitions,however,aren't confined to the developing world.

It didn’t take long for analysts to conclude that,if Facebook were successful in driving acceptance of Libra in countries with central banks unable to defend the value of their currencies,its consortium could effectively drive monetary and fiscal policies in those economies.

It’s also isn’t a great stretch to envisage that at some point in future,if Libra becomes a popular medium for exchange,that Libra’s Swiss-based Libra Association might decide to offer more financial services and,in particular,might decide to offer credit.

That would essentially mean that it – a self-governing club of private companies - had created its own central bank and fiat currency and the ability to create credit which would be disruptive,not just for banks,but for central banks and governments.

There are those who think that prospect is risible but Facebook and the other tech giants have demonstrated their ability to exploit their economies of scale and network effects to create dominant global ecosystems with vast user numbers.

Financial information is essentially just data and Facebook and its partners should be able to grow Libra’s user base and exploit both its data and that within their existing networks for profit,if they are left to do so as loosely checked and regulated as big tech companies like Facebook and Google are today.

Even if it were to remain just a payments system,fully backing the Libras in circulation with the fiat currencies in its reserve,the decisions it made about which currencies and assets to buy would have the ability to move bond markets and currencies.

The notion that the Libra Association,an unregulated oligopoly led by Facebook,could become a global shadow bank or even a de facto global central bank is more than disconcerting.

That is why governments and central banks should do whatever it takes to try to ensure that Libra is regulated stringently enough to limit any systemic implications – or kill it off before it has the opportunity to develop them.