Economist and academic John Vaz believes Bitcoin (BTC) still faces stiff competition from Facebook’s troubled Libra project.

Vaz told Cointelegraph that Bitcoin has scaling challenges in terms of payments and was used disproportionately as a vehicle for speculation. By contrast he said Libra has been purpose-built to scale as a payments network and could quickly emerge as a major competitor despite its ongoing issues with regulators.

“Libra isn’t dead,” he said,“they’re just navigating the regulatory nightmare.”

However, Vaz dismissed central bank digital currencies (CBDCs), describing them as a weak “defensive posture” in response to the threat crypto assets posed to their control over money supply and credit.

Vaz said that “the biggest competition for Bitcoin comes from other cryptocurrencies”.

Facebook’s Libra is very interesting

While noting that Facebook suffers from issues of public mistrust, Vaz said that the proposed model for the Libra stablecoin was “very interesting” — emphasizing both the basket of assets underpinning the stability of the instrument, and the existing networks that large tech companies are able to tap into.

The economist argued that companies like Facebook could capitalize on their existing user base and said that financial transactions were already taking place.

“They are targeting a market which is ready-made for them in the sense that people are already making transactions on Facebook, and Messenger, and WhatsApp, and Instagram — they own the lot. So they've got the message traffic, and those people are doing economic transactions already using fiat.”

As such, Vaz said that Libra would launch with “a very large ‘domain possibility’ — perhaps more than any other cryptocurrency from day one.”

He predicted that Libra’s initial target will be developing countries rather than developed markets, and stated: “They will entrench themselves there - where people are already heavily using the apps and they have a need for payments.”

CBDCs comprise defensive reaction to crypto asset

Vaz doesn’t believe central bank digital currencies (CBDCs) will be much of a competitor to crypto assets and stablecoins and were “a defensive posture”:

“They will be a kind of rearguard action being fought by the central banks because they don't like cryptocurrency.” 

Rather than central banks posing a threat to Bitcoin, John believes that Bitcoin and other cryptocurrencies threaten to undermine banks’ control over the money supply. He said: “It takes away their ability to pull a lever in the economy because under things like Bitcoin, you can't create money by the way of credit.”

“Banks can lend that money up to maybe eight or nine times on a fractional reserve system. So a lot of banks create massive money supply on the fractional reserve system. Under Bitcoin, you can't lend what you don't have.”

Vaz asserts that CBDCs do not offer any benefits beyond peer-to-peer settlement — “which you get by default with cryptocurrency.” “Central bank digital currencies are probably more about tracking money than providing benefit,” he added.