Facebook Crypto, I’m sure you have heard the phrase…
Cryptocurrencies are an emerging industry, similar to how the internet itself was an emerging industry in the 1990s. The technologies that are being developed and the ecosystem that is being built will serve as the foundation of a future world where cryptocurrencies will be as integral as smartphones and the internet are today. We are on the verge of a massive financial revolution which will become apparent in the coming decade.
This development will give birth to many tech giants, who specialize in crypto just like successful companies had risen from the dot-com rush. It’s no surprise then, that large companies like Facebook are looking to enter at the ground level and take a leading position in this nascent industry. After taking a somewhat negative stance on cryptocurrencies, where they had banned crypto ads on their platform, Facebook has had a change of heart.
In June of 2019, they announced to the world, their own cryptocurrency called Libra by launching its whitepaper. The news took the whole world and the tech space by storm. Before the launch, there had been many rumours circulating that Facebook was definitely working on something. In hindsight, it should have been apparent as they were continuously hiring blockchain experts from all over the industry.
On the day of the launch, Facebook revealed a lot of details about Libra. There was no press conference or a stage event and as such, their whitepaper did most of the talking. The Libra whitepaper is a comprehensive document and it goes into great detail about how it works, how people all over the world will be able to use it and who would be running and developing it further.
Basically, Facebook set up an association called the Libra Association to develop and manage the Libra cryptocurrency. This association comprises of tech heavyweights from the industry including Visa, Mastercard, Uber, Vodafone and more. Some of these have left the association since then, due to regulatory pressure. Facebook will have just one vote just like everybody else, which is an attempt to make Libra a decentralized currency. It’s also an attempt to distance itself from the privacy-related controversies.
The Libra cryptocurrency will run on the open-source Libra blockchain, whose testnet was also launched the same day. Users will be able to send each other Libra instantly and for almost no fees at all. Facebook also set up an independent company called Calibra that will build the Calibra native wallet using which, users will be able to transact in Libra. Other companies will be able to offer their own wallet solutions on the Libra blockchain as well.
Facebook’s plans also involve integrating the Calibra wallet into its popular apps like Whatsapp and Messenger. This alone will instantly make Libra a worldwide phenomenon, with billions of users on board in a matter of days. As with all other cryptocurrencies, it will put the people in charge of their money, as they wouldn’t necessarily need banks to store or take care of their holdings. It truly has the potential to do to banks what email did to post offices.
After the announcement of Libra, responses from all over the world started pouring in almost immediately. Many countries in the world expressed grave concerns about Facebook’s plans. Many of them called for immediate research into the effects that Libra would have on the global financial stability and economy. Some countries even went as far as banning the cryptocurrency outright.
This is understandable as Libra has the potential to be detrimental to the very sovereignty of a country. It is essentially a border-less stablecoin and if a major portion of the world’s population adopted it, this could spell disaster for fiat currencies worldwide. The US lawmakers held several hearings to understand the workings of the Libra association and cryptocurrency in which prominent figures like David Marcus and Mark Zuckerberg testified.
The major concerns for regulators worldwide are the potential of terrorist financing and money laundering, that could take place on a huge scale if Libra goes mainstream. In fact, this has been their concerns regarding all of the cryptocurrencies but since Libra is a stablecoin, the concerns are multiplied.
Also, Facebook’s reputation regarding user data is not something that inspires confidence and regular people have commented that they wouldn’t feel safe with Facebook having access to their financial data, regardless of what the company says or does.
Facebook was, of course, dismissive of these claims, stating that their objective is to help the un-banked population of the world and make financial inclusion a reality. They stated that they will do their part, to meet the requirements that regulators worldwide will set and take measures to counter terrorist financing, money laundering and protect users’ data.
If everything goes according to Facebook and the Libra Association’s plans, it would make them an overnight leader in the world of cryptocurrencies. This would no doubt put them in a very influential position, to guide the industry as a whole. Other cryptocurrencies like Bitcoin and Ethereum could benefit hugely from Libra’s popularity, as more people would be looking to diversify their crypto holdings.
But, from the looks of it, Libra will have a difficult time launching in the first place. Regulators worldwide are still not convinced about Libra and very few countries want to allow it. By the time the Libra Association complies with all the necessary regulations, Libra’s design could end up looking very different. It might not even be recognizable from when it was first launched. This would, of course, undermine the very reason for launching such a cryptocurrency.
The whole world is trying to figure out the best approach to deal with cryptocurrencies as a whole and when rules and regulations are finalized, it will make things a lot clearer. Maybe Libra would be allowed to exist but in a very limited way from what was originally planned.