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
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. Despite this, the
Indian government has submitted a draft bill to the supreme court that seeks to
legally ban cryptocurrencies.
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”. 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
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
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
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
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
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.
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.