Facebook is the most popular social media platform in Russia, and the proposed launch of the Libra cryptocurrency has caused great interest among many Russians.
However, Russia is still a closed country for cryptocurrency, and the launch of an integrated digital currency on a social network used by millions could present regulatory issues.
Will the government attempt to ban the currency? Or could this result in a blanket ban on Facebook until Libra is understood?
Facebook in Russia
Facebook is the biggest social media site in Russia with around 53.5 million monthly users – around 50% of which are believed to be cryptocurrency users.
Cryptocurrency is most popular among tech-savvy young adults, which also happens to be the primary user base for Facebook in Russia.
Russian authorities are worried that the Libra project may have a huge impact on the payments industry, as it could provide new financial services that will immediately be globally available to all network users and replace Russian services and financial institutions.
The Libra project may give more freedom to money. Banks will have to put up with capital leaking into cryptocurrency while intermediaries for cash circulation between entities will no longer be needed.
The good news for the Russian government though is that cryptocurrency can reduce dependence on the dollar and help economies such as Russia avoid US sanctions.
Libra and the Russian financial system
The Central Bank of Russia has consistently expressed its negative opinion on cryptocurrency and constantly aims to prevent its usage in Russia.
If in the future every Facebook user in Russia uses Libra as their main means of payment, the traditional banking system may collapse.
Most likely, the Libra cryptocurrency will have the same status as any other foreign currency in Russia in that it can be bought, sold, and stored, but cannot be used domestically inside the country.
Russia has also indicated in the past that it plans to shut its internet off from the rest of the world and use its own providers. This would mean that all social media will not be available domestically.
If this happens, then Russian Facebook users will have to switch to Russian alternatives such as Vkontakte, allowing the government to bypass the Libra issue entirely.
In its current form, the Libra cryptocurrency is a potential danger to Russia’s financial system, as Facebook’s Russian audience is growing every day.
As well as the increasing number of active users, the Russian government cannot stop the younger generation’s interest in modern technologies and cryptocurrencies.
As such, the government may attempt to ban the usage of Libra for payments or may even ban Facebook as a whole to prevent any potential fallout.
Facebook’s global platform can potentially onboard millions of new cryptocurrency users, but with the Libra project still facing scrutiny in the US and many other countries still sceptical of cryptocurrencies generally, the project may struggle to gain traction.
Find out more about Libra with Coin Rivet here.