Will Facebook’s Libra create a crypto boom?

The following is a guest post courtesy of Matt Harrod, VP of Europe for processing.com

Since the creation of Bitcoin in 2009, cryptocurrencies have struggled to gain a foothold in the mainstream financial system and still haven’t created the momentum necessary for them to be used for everyday transactions.

Now, with Facebook announcing that it’s planning to enter the market, this may be about to change. With the social network currently being used by almost 2.5 billion people around the world, could the introduction of Libra make cryptocurrencies more popular than ever and enable the technology to become a viable and regularly used payment method?

Going head-to-head with regulations

Before we get ahead of ourselves and say that Facebook is going to revolutionize the crypto space, we must understand that the social media giant is currently facing a number of hurdles; the tallest and most daunting one being regulatory bodies. It leaves us questioning whether the tech giant is large enough to jump them all.

Already, Libra is facing opposition from government bodies who are beginning to review legislation surrounding cryptocurrencies. In response to the announcement, they have begun to do their homework and find out more about how the technology works and the impact it may have on the financial system. Many are developing global policies and card scheme limitations, to ensure that the technology is overseen and regulated by the relevant authorities.

Matt Harrod

The most obvious example of this is in the US, where a couple of weeks ago, the US House Financial Services Committee grilled Facebook, while also conducting a hearing into its new cryptocurrency. During the hearing, Facebook’s trustworthiness came under scrutiny, with Ohio’s senator Sherrod Brown stating that the idea of Facebook being trusted with peoples’ bank accounts and the economy as being delusional.

A number of other countries have also started clamping down on regulations surrounding cryptocurrencies. The Royal Bank of India (RBI) has already placed a ban on banks and financial institutions from providing cryptocurrency services, however the legitimacy of its actions has come under question as the decision should have come from a legislature instead of RBI[1]. Despite this, the Indian government has submitted a draft bill to the supreme court that seeks to legally ban cryptocurrencies[2].

Despite Facebook’s announcement being rather unpopular among politicians, there are some countries that are beginning to explore the benefits of cryptocurrencies, such as Estonia, where the head of the Financial Supervision Authority (FSA), Kilvar Kessler, says, “there’s no sense in trying to fight cryptocurrencies like Facebook’s Libra”[3]. This isn’t just because Facebook has a habit of regulating itself, instead, he believes that regulators should learn how the technology works and adapt legislation accordingly.

There are several reasons why government bodies haven’t been too excited about the introduction of cryptocurrencies, including; fear that they might devalue local currencies; worries about a lack of transparency resulting in money laundering; and not understanding how the technology works. However, if Facebook successfully launches its cryptocurrency, governments around the world will have to take notice and begin working with the tech giant.

 How cryptos may make the big time

So, let’s say that Facebook successfully launches Libra. What will it mean for the crypto industry?

Facebook’s Libra may change people’s perception of cryptocurrencies. A major tech company such as Facebook entering the market may legitimize the payment method in the eyes of the public. As more consumers gravitate towards it, others will soon follow suit and place greater trust in Libra. This could create a snowball effect, where the public will become more willing to replace conventional payment methods with crypto payments.

What’s more, we’ll likely see other tech giants wanting in on the action. In response to Facebook’s move into the industry, we could see cryptocurrencies become a key component of apps such as ApplePay. This will go a long way toward promoting trust in the payment method. 

All this change will alter the dynamics of the crypto industry itself. We may see mergers and acquisitions become a key component of the market if large tech companies like Apple enter it, as it is likely they will buy existing cryptocurrencies rather than develop their own. This will be excellent for spurring on innovation in the industry as it will give existing companies the funding necessary for research and development.

Time will tell

Only time will tell if Libra is the cryptocurrency that sparks the chain reaction needed to create a crypto boom. If it does, regulators are going to need to keep pace with the quickly changing environment and growing consumer demand.

For now, all we can do is watch and wait to see how Facebook fairs as it continues to discuss its plans with governments around the world. 

References:

[1] https://cio.economictimes.indiatimes.com/news/internet/rbi-has-no-authority-to-ban-cryptocurrencies-iamai/70686321

2 https://news.bitcoin.com/india-introduce-crypto-bill-next-parliament-session-community-responses/

3 https://news.err.ee/963948/fsa-chair-cryptocurrencies-here-to-stay-regulation-inevitable

Matt Harrod, VP of Europe, Processing.com

Matt has almost 15 years’ experience in the payment and Fintech space, working for major European brands, including Lloyds Banking Group, Median and Ingenico. He has a wealth of experience in international business development, supporting clients in harnessing the power of payments to lay the foundations for strong business growth. 

An expert in the gaming sector, Matt offers considerable insight into the impact of Europe’s uncertain political climate on iGaming operators in the region.

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