Today, many large international companies, far from the world of blockchain, are thinking about creating their own cryptocurrencies. Facebook was no exception, and back in 2017 it announced the possible appearance of a new token. And now, in June 2019, Facebook’s Libra was presented to investors. The news caused a storm of emotions among crypto-enthusiasts, but almost the entire traditional financial sector was skeptical.
Libra is going the way of most of the top cryptocurrencies. Its purpose is the free transfer of funds between token holders. The analogy in this case is the Chinese WeChat, where NEM cryptocurrency is used to transfer funds between users. Until recently, the cryptocurrency integrated into the messenger could even be used to pay at points of sale.
Facebook founder Mark Zuckerberg has the same idea. Libra is intended to provide the exchange of money between 1.7 billion users of the social network around the world. The system should be joined by the partner companies, which invest in the project and take part in its development. By the moment of the public launch of the program in 2021 there will be more than 100 such companies. Among them there will be VISA, MasterCard, PayPal, Uber, Ebay and other financial and trading companies. In addition to investing, partners get to incorporate Libra’s technology into their own system for future use. And all would be well with this Zuckerberg project, but at the launch of Libra a wave of criticism hit Facebook instead of rave reviews.
What Zuckerberg did not please the international banking system
Even before the official release of Libra, many representatives of the banking sector were seriously worried about the possibility of launching a cryptocurrency from Facebook. The reasons for these worries are obvious.
Banks saw the project from the world-famous social network as a serious competitor. After all, the active audience, which counts billions of users, can massively move to Libra as a means of payment. This will free people from the high bank fees. Many people are also annoyed by the relatively long time for traditional money transfers. Where there are p2p payments, there will be p2p lending, which could finally kill the international banking system. Plus, Libra’s huge number of partners, which include major marketplaces such as Ebay, will allow Facebook users to use tokens as a way to pay for purchases. It seems like a breakthrough and revolutionary solution, but it’s not that simple.
There are several concerns about Libra’s future development
- First, the unsettled status of cryptocurrencies was the reason. High volatility, lack of legislative fixation in many countries make cryptocurrencies be treated solely as a speculative tool or even as a financial pyramid.
- Second, Facebook itself has recently become the cause of much public discussion. This is all about leaks of confidential information in which the social network has recently been caught. This circumstance can make the user think whether to trust his funds to Facebook.
- Thirdly, Libra’s partnership with the announced companies is, to put it mildly, “flexible”. At the time of the agreement, the companies set conditions under which they can withdraw from the project at any time. And a great emphasis in the development of Libra is precisely on the client base of partner companies. And the activity of joining the project of new members is not yet impressive.
Based on the above arguments, the Bank for International Settlements expressed its concerns about Libra, which considered the cryptocurrency from Facebook a serious threat to the entire banking sector. The lack of regulation and geographic boundaries, according to the bank analysts, can create chaos in the global economy.
Does Libra have a future?
Many large companies plan to create similar projects based on blockchain technology. But their interests may differ dramatically. One thing is unchangeable: the increased attention to cryptocurrencies not only from users, but also from companies sooner or later will cause the need for legislative regulation of the whole sphere. And the development of blockchain by giants like Facebook can only accelerate this process. On the other hand, the possibility of regulation can challenge the principles of any project based on the use of cryptocurrency – anonymity and decentralization. It is possible that Libra is the beginning of the end of the crypto-epoch and the emergence of new money.