Facebook recently announced its upcoming foray into the financial world with Libra, a (sort of, but more on that later) “cryptocurrency” that will essentially allow people to buy things or send money with zero or nominal fees. Although not set to launch until the first half of 2020, the buzz over Libra is causing a mix of reactions the world over, ranging from people asking why Facebook is launching a cryptocurrency (it’s not) to how it will affect the Bitcoin price. Keep reading this Vestle crypto currencies article to learn more about Facebook Libra.
Is Libra a cryptocurrency?
The simple answer is no. Because – like Bitcoin – Libra relies on blockchain technology to move its assets across borders, it’s easily confused with a cryptocurrency. But while Bitcoin is a decentralized network exempt from permissions and resistant to censorship, Libra is run by a consortium of large corporations which will still be impacted by regulations from various global governments. Also, it’s not a currency, it’s a digital token or – in financial parlance – a “stablecoin.” So while Facebook may be the name launching Libra, they’re not the ones in charge. According to Tech Crunch, that distinction goes to the Libra Association, a not-for-profit organization comprising 28 founding members which oversees the development of the token, reserve of real-world assets that endow it with value, and governance over the blockchain. Notable names among the 28 members include Mastercard, PayPal, Spotify AB, Vodafone Group, Lyft, Uber and Women’s World Banking, and – along with Facebook – each gets one vote in its governance.
Why is Facebook even bothering?
Facebook is nothing if not an opportunist, and this time, what came a-knocking was the realization that having a hand in the way people spend their money could mean learning more about their spending habits, a bit like Facebook’s ad business. For the 1.7 billion people in the world who don’t have a bank account, an alternative financial services company offering them such benefits as easy transaction with no or low fees could drive Libra’s success. Considering the current high tide of alternative banks such as Monzo, Revolut and N26, it was only a matter of time until Facebook joined the parade.
How does it work?
Libra works similar to existing cryptos, in that you’ll be able to buy or cash out your Libra online (anonymously) at dedicated exchange points, then spent it via third-party wallet apps, such as Facebook’s Calibra wallet, which will be built into WhatsApp, Facebook Messenger, as well as its own app. If Libra sounds a bit like PayPal, that’s because this is kind of what it is, only with more ambitious long-term goals that include lower and fewer fees, versatility and efficiency.
Is Libra legit?
Libra has described their mission as “…to enable a simple global currency and financial infrastructure that empowers billions of people” – which sounds a bit like the ostensibly altruistic – and “…give people a way to connect…”. Where do we know this rhetoric from? Oh yea, Facebook used almost the same words before, you know, spying on people and selling their private info to shady organisations like Cambridge Analytica.
A number of international regulators have already expressed scepticism. According to Randal Quarles, Chair of the Financial Stability Board (policy coordinator for G20 countries), “A wider use of new types of crypto-assets for retail payment purposes would warrant close scrutiny by authorities to ensure that they are subject to high standards of regulation.” So, in short, it appears Libra will have to play by the rules.
Is Libra affecting other cryptocurrencies?
Kind of. In mid-June 2019, Bitcoin leaped past $10,000 – its highest since March of the previous year. And when Bitcoin – the highest-valued cryptocurrency in the world – makes a move, the world not only watches, it wonders why. According to Inverse, one reason could be that since Bitcoin is a leading crypto, popular interest in cryptocurrency can potentially ripple outward to affect Bitcoin as well. But there is no way to prove this and considering we’re at least half a year away from even seeing Libra in action, we can only sit back and wonder.
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