Facebook's New Cryptocurrency: World-Changing or Nothing Burger
June 24, 2019
By Dara Albright
Facebook—along with a consortium of some of the world’s most recognized financial firms, e-commerce and technology companies, academic institutions and venture capitalists—released a much-anticipated white paper revealing the details of a new global digital currency called Libra, which will essentially enable people to send or receive money, as well as purchase products, with little-to-no transaction costs.
While the news has sparked much debate as to how Libra will impact the digital currency marketplace, and financial services at large, the consensus seems to be that Libra demonstrates a growing mainstream acceptance for blockchain technology and it will help boost the global demand for incumbent cryptocurrencies such as Bitcoin and Ethereum—both rallying in the markets following the Libra news.
Facebook’s colossal userbase—coupled with the support of well-established financial and technology companies including Visa, MasterCard, and PayPal—could best position Libra to achieve mainstream global adoption—something even Bitcoin is still struggling to attain.
But are name recognition and deep pockets enough to enable Libra to dominate the cryptocurrency marketplace and realize its lofty mission of bringing banking to the unbanked by offering a lower-cost, more-accessible, and better-connected global financial system? Many pundits in the cryptocurrency industry are skeptical. There are some immediate hurdles that stand in Libra’s way of eclipsing the cryptocurrency industry.
First, unlike the Bitcoin blockchain, which is completely decentralized (democratic), the Libra blockchain is presently what is known as a “permissioned blockchain” where only a select group of entities—ones that have met certain technical and financial criteria—control the governance of the blockchain. The problem with this structure is that it is more vulnerable to attacks and censorship. Furthermore, particularly given Facebook’s history of data abuses, Libra may be hard pressed to find trusting users.
Even Congress is voicing its concerns. House Financial Services Chair Maxine Waters called on Facebook executives to testify before her committee and urged the company to hold off on plans to develop Libra. Waters stated, “Given the company’s troubled past, I’m requesting that Facebook agree to a moratorium on any movement forward on developing a cryptocurrency until Congress and regulators have the opportunity to examine these issues and take action.”
The U.S. is not the only sovereignty with trepidations. The French Minister of the Economy and Finance, Bruno Le Maire, stated that France intends to “ask for guarantees” from Facebook in regard to Libra. And it was also reported that Russia will refuse to legalize the use of the Facebook token.
Whether consumers and governments ultimately accept Libra remains to be seen. But, given the worldwide media attention to Libra, one thing is absolutely certain: More and more people around the globe are becoming aware of digital currencies and blockchain.
Perhaps Lou Kerner, co-founder of CryptoOracle.io, said it best, “Love it or hate it, Libra is going to be a major topic of conversation in the crypto ecosystem for the foreseeable future.”