Since the inception of cryptocurrency, there has been an ongoing challenge to commoditise the digital coin on a large scale and enable it to become a viable consumer currency used for daily purchases, as opposed to a fund for high risk investors.
The announcement from Facebook that it is launching its own cryptocurrency, Libra, has the potential to change all of this. With close to 2.4 billion people using its social network each month, combined with the company’s many other social platforms, like WhatsApp and Messenger, Facebook brings with it the necessary critical mass to help take Libra mainstream.
Overcoming regulatory hurdles
However, a growing challenge for any new cryptomerchant is regulation. National regulators around the world are now much more knowledgeable about cryptocurrencies than they were even two years ago and are developing global policies, alongside card scheme limitations, to bring them under the oversight of the relevant authorities.
There have been some countries that have taken the leap into facilitating the use of crypto early on, such as Estonia and Malta. But, with Facebook’s customers potentially driving Libra into every corner of the globe, those regulators that haven’t yet made moves will need to be on their toes and prepare the way now for the arrival of digital currency.
Most governments and regulators have resisted acting to bring crypto into the fold for several reasons. Many lack an in-depth understanding of how they work. Others have been concerned about crypto’s potential to devalue local currencies, as well as the lack of transparency around flow of funds.
With one of the largest companies in the world is pushing a crypto product into their country regulators no longer have choice but to act. They will also have to work out ways to keep up. Facebook tends to self-regulate and, from the initial public communications, Libra will be no different. With regulators in most countries not yet having a specific crypto policy, it looks like the rest of the industry will now look to play by Facebook’s rules.
“With such a huge company as Facebook now leading the charge, others such as Apple, which is becoming increasingly payment focused with Apple Pay, may look to replicate. Perhaps the likes of Google and Amazon will soon join in?
Investment and innovation
There are big positives for the crypto industry in general as a result of this development.
Firstly, the fact that such a huge tech company, like Facebook, is entering the market legitimises the concept in the eyes of the masses, so will switch current doubters into believers that this truly is the future of currency. Once this obstacle is overturned, there will be many more potential consumers pulled in with the Facebook tide.
Secondly, with such a huge company now leading the charge, others such as Apple, which is becoming increasingly payment focused with Apple Pay, may look to replicate. Perhaps the likes of Google and Amazon will soon join in?
It may well be the case that these newcomers will look to buy a ready made cryptocurrency, instead of developing their own product. This therefore creates innovation in the market, with investment to support the innovation. Combined with the changing legislative landscape, this will serve to create a radically different and exciting sector.
All of this will, no doubt, be seen by some parties as a weakening of the core ideal of cryptocurrency. After 2008’s economic challenges, Bitcoin developed as a way of taking control from the financial institutions that caused the problems and brought control back to the people. What is happening now is that the financial control is being transferred from financial corporations to tech corporations who, in the eyes of many, already have too much power and knowledge of their users. Observing how this plays out in a world that is increasingly trading personal data for convenience will be very interesting.
I have said for years that Bitcoin, Ethereum and the like are essentially the Myspaces of crypto and that everyone is waiting for the Facebook of crypto to arrive. With the launch of a new digital currency by Facebook itself, it looks like that analogy may be more accurate than even I predicted.
But we cannot know for sure – only time will tell if Libra truly turns out to be the crypto that makes it to the payment mainstream.
By VP of Europe for Processing.com, Matt Harrod