In true Silicon Valley fashion, Facebook’s (NASDAQ: FB) CEO Mark Zuckerberg is making a big splash with his recent announcement to launch Libra – an alternative cash system based on cryptocurrency technology. Zuckerberg made the announcement to bring digital currency to the masses from the steps of the historic San Francisco Mint, the 150-year-old building that had safeguarded one third of the United States’ gold reserve for over a century.
While electronic cash transfers have become ubiquitous in many places, North America is still largely driven by outdated, insecure methods of sending money to others. Facebook’s audacious crypto-project represents an opportunity for them to expand into a market largely dominated by government-regulated legacy institutions that have a vested stake in traditional payment processes and remittance services (international money transfers, etc).
Facebook attests that Libra will empower users to buy things or send money outside of the traditional financial system at a fraction of the cost. Big names like Mastercard, Visa and PayPal have already signed on as partners and with Facebook’s existing relationship with over 7 million advertisers and 90 million small businesses – chances are this list will only grow.
This is first serious attempt by a big player to push cryptocurrency into the mainstream and investors have responded in kind. Bitcoin’s price surged after Facebook’s Libra announcement, hitting its highest point at $9,469 in over a year, as believers bet on the social network’s street cred to legitimize cryptocurrency with a larger global audience.
For those investors keen on the digital currency’s trading potential, the Libra organization released a white paper explaining that it’s designed to allow trade between a user’s local currency and Libra coin but is intended to operate as a stablecoin – one that is tied to real assets to minimize large market fluctuations. However, Libra Investment Tokens (LIT) will reportedly be made available to accredited investors interested in buying into ‘Facebucks’. While the details have not been released, LITs are intended to pay out interest generated on the reserve assets.
Facebook’s own stocks have been recovering well after an antitrust investigation sent them plummeting at the beginning of June. Experts say the stock presents a rare opportunity for investors to buy up these top stocks and predict that it’s not likely the big tech company will be broken up. Their Libra announcement is likely fueling additional investor interest as stock prices continue to trend upwards in the third week of the month.
Libra is expected to launch in 2020 but not everyone is embracing Facebook’s attempt at an unregulated universal currency. Zuckerberg’s announcement has thrown more fuel on Washington’s fire after US lawmakers have already expressed concerns about privacy and security of user data.
The House’s Financial Services Committee Chairwoman, Maxine Waters, has urged the Silicon Valley superpower to cease development of their cryptocurrency until Congress and other regulators can investigate it further. Zuckerberg has said he’s open to dialogue on the issue.
Sources:
https://techcrunch.com/2019/06/18/facebook-libra/
https://www.forbes.com/sites/enriquedans/2019/06/17/facebooks-cryptocurrency-great-idea-wrong-company/#6b154af12f98
https://ca.finance.yahoo.com/news/facebook-triggers-fresh-washington-fury-220959313.html
https://www.economist.com/leaders/2019/06/22/facebook-wants-to-create-a-global-currency
https://www.nytimes.com/2019/06/18/technology/facebook-cryptocurrency-libra.html
https://www.cnbc.com/2019/06/18/facebook-fb-stock-jumps-on-libra-crypto-that-could-be-major-initiative.html
https://www.cbsnews.com/news/bitcoin-price-hits-1-year-high-on-boost-from-facebooks-libra-plan/
https://www.cnbc.com/2019/06/07/big-techs-antitrust-fears-give-investors-a-rare-chance-to-buy-facebook-amazon-on-the-cheap.html
https://www.coindesk.com/theres-a-second-token-a-breakdown-of-facebooks-blockchain-economy
Disclaimer: The writer is an experienced financial consultant who writes for Finscreener.org. The observations he makes are his own and are not intended as investment or trading advice.
