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Facebook’s Libra: A Wide Range of Opinions


Facebook’s announcement earlier this year about the creation of its own cryptocurrency, Libra, sent shockwaves around the world and triggered a variety of opinions about where this would go and how it would impact the financial world. This post on Twitter was among the most skeptical:


“Can’t wait for a cryptocurrency with the ethics or Uber, the censorship resistance of PayPal, and the centralization of VISA, all tied together under the proven privacy of Facebook.”

-Sarah Jamie Lewis, Executive Director at Open Privacy.


While it is true that most of the press Facebook has been generated in recent times has mostly been bad news about privacy issues with user’s data and the wrath of regulators around the world. During this time Facebook has managed to continue to drive strong advertising revenue from their model and maintain their user base numbers in excess of 2.4 billion.


So, when a company with two times the number of users as the largest country in the world announces they are creating a cryptocurrency, it was no surprise that it generated a mixed bag of skepticism and praise.


Over the past few months there have been an endless stream of articles written taking up positions on this new direction for Facebook. Here are some of the opinions that we have seemed to see the most across the digital landscape:


Libra’s biggest advantage is also its greatest weakness: Facebook itself.


Facebook has taken a lot of heat in the last year and has a very sketchy history of taking care of user data and privacy. This has forced executives to appear before lawmakers and work heavily with federal regulators. This could put Libra on the path to becoming the latest version of PayPal that could struggle to meet the standards for decentralization, animinomy, and security that define true cryptocurrencies.


Libra will be classified a stable coin. This gives the potential fledgling token an advantage head and shoulders above every existing stablecoin on the market. Facebook’s capitalization far exceeds that of all the potential competitors. They would also have the advantage of having piles of actual fiat currency to move initiatives forward. These two factors would allow Libra to maintain maximum stability under the most dire market conditions.


Mark Zuckerberg testifying before Congress in 2018.


Libra will bring cryptocurrency to the masses.


Did we mention the 2.4 billion users Facebook had at the end of the second quarter of 2019? While it is true that the social media giant has a bit of a trust issue, Libra could prove to be the bridge between fiat currencies and cryptocurrencies. Many experts have pointed out that Libra will not have all the characteristics of a true crypto. Many in the industry feel that is OK.

Stable coins depend on users trust to succeed. FB is one of the most valuable and well-known companies on the planet. They have taken some hits with how they handle privacy and user data and are now under intense regulatory scrutiny. Continued transparency and regulatory compliance makes Facebook uniquely positioned and perhaps the only organization on the planet that could single-handedly take crypto mainstream worldwide.


Libra is Facebook’s desperate attempt to not go the way of MySpace

Many reading this never had a MySpace account or even know what it was. Mark Zuckerberg probably had a MySpace account at one time. For him it has to be a cautionary tale that has been in the back of his mind from the very beginning. Despite continued financial success, the loss of trust from the Facebook community has the platform at a crossroads.

More than a few across the industry feel that Facebook is doing this as a last gasp at regaining public trust before it begins a slide into obscurity and go the way of MySpace. Legislators in countries all over the world have been on a warpath to rein in the social media giant. Everything Facebook does is now looked upon with a suspicious eye.


Overall, Facebook has a terrible track record of maintaining the privacy of users data and is very slow at moving against bad actors on the site. Every time they face new blowback they say they will be better going forward. The stakes are significantly higher when talking about financial transactions for up to potentially 2.4 billion people around the world. Facebook can’t keep Russian bots from posting fake news, but somehow they are now up to the task of tackling AML and KYC.


Source: https://www.raconteur.net/infographics/banking-the-unbanked


Libra will bring economic upward mobility to billions around the world


The World Bank reports that there are 1.7 billion adults around the world without access to a bank account. 1.2 billion of these individuals already own a smartphone and many are already using cryptos on some level. Libra would simplify the process for new crypto users and help people living in countries experiencing hyperinflation.


Libra will be run by a consortium that includes FB and a growing list of 27 partners. The nature of the trust they seek to regain will be in the blockchain itself. If it is transparent and remains truly decentralized then it could eventually yield more financial power than any single country in the world. Libra would be the death toll for many sovereign currencies that have been teetering on collapse for many years.


Summary


All of the leadership at Facebook has made it very clear that Libra is not being created to compete or supplant Bitcoin. Presently, Facebook is in talks with Binance to have Libra listed on their exchange as a stable coin while other executives continue to be grilled In Washington D.C. for answers and more specific details.


Will Libra be a success? It may not even get out of the gate if regulators deem that it is too risky or too much of a threat to fiat currencies. If Facebook can successfully appease the feds and get a green light to move forward it is still anyone’s guess if Libra will be embraced by the Facebook community and crypto users at large.


In the past Facebook has been able to buy their way into a position of dominance in new markets by buying up companies with huge piles of cash. This is a completely different undertaking. While it is unlikely that Libra will compete with Bitcoin or the US dollar, they seemed to have an extremely likely chance to be highly competitive among existing stable coins like Tether, TrueUSD, USDCoin and EURS.

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