Entering The Crypto Realm — A Big Career Move, Facebook Caused Ripples In Cryptocurrency Supervision
On the afternoon of June 18, Facebook announced that it will launch the cryptocurrency — Libra, which made a splash in both the digital market and the world’s financial system. This article will make an introduction about the third largest initiative “Libra”.
What is Libra? How to Get it?
Data shows that Facebook has more than 2.7 billion global users. With such a huge user base and influence, Libra has been hailed as the third largest pioneer in the cryptocurrency realm right after Bitcoin in 2009 and Ethereum in 2013.
So what exactly is Libra? Just like the white paper’s prologue reads, Libra’s mission is to enable a simple global currency and financial infrastructure that empowers billions of people.
Libra is designed to be a stable digital cryptocurrency that will be fully backed by a reserve of real assets — the Libra Reserve — and supported by a competitive network of exchanges buying and selling Libra.
According to the white paper, for new Libra coins to be created, there must be an equivalent purchase of Libra for fiat and transfer of that fiat to the reserve. That said, in this blockchain system, a Libra point is equal to 1 US dollar, and the price is stable.
This means that Libra is not created for profit, but rather to convert a currency into a more “stable” currency.
For example, a traveler can directly exchange his fiat currency for LC (Libra Coin), then use it to shop directly, meanwhile, the tokens can be converted to any other fiat currency at an ultra-low fee rate. Similar to a low-rate, borderless payment system.
It can be foreseen that there are three application scenarios of LC (Libra Coin), the cross-border remittances; Libra-based payment; specific online payment, including virtual goods, e-commerce, reading, entertainment, music, etc.
Libra Makes Payment in Backward Countries Easier
In countries and regions where electronic payments are lagging behind, Libra may become a more convenient and less expensive payment and transfer tool.
Libra’s official website uses a set of data to portray their vision:
At present, 31% of the world’s population (1.7 billion people) do not have bank accounts. They have to pay more than $4 per month for financial services. Traditional cross-border transfers are also cumbersome and take an average of 3–5 business days to complete. Using the cash, up to $40 billion in cash are stolen or robbed in a year…
The emergence of Libra will change everything, cause it combines the features of traditional finance and blockchain finance of stable value, fast transaction, expandability, and security.
Since Libra’s vision is great, then how to get it as an ordinary investor?
Facebook said Libra will be acquired through an e-wallet app called “Calibra”. By using this app, users will be able to trade with anyone in the world, even without a bank.
Technical Advancement Or A Wolf In Sheep’s Clothing
The widely report of Libra has attracted giants of various industries, in which most of them expressed the affirmation of Libra’s technology, while some hold different grounds.
Wang Xing, CEO of Meituan directly attacked: “Facebook’s strategy of marketing Libra is very clear, that is, to gradually replace the currency systems of 200 weak countries in the world and to bow to or conspire with a few powerful countries”. Luo Mei, Associate Professor of the School of Economics and Management of Tsinghua University, also pointed out that Libra may pose a threat to the relatively weak financial system.
Ma Huateng (also known as Pony Ma), CEO of Tencent, said insipidly: “The technology is mature and is not difficult, what really matters is the permission of regulations”.
Sogou CEO Wang Xiaochuan bluntly said that Facebook’s leading digital currency plan marks the arrival of Web 3.0, “the world will change due to Facebook”, he added.
Zhou Hongyi, the co-founder, CEO, and chairman of Qihoo 360, said: “n the future, many government powers will be taken away by Internet companies… Zuckerberg will establish an online country with billions of population”.
Of course, there are different remarks. Ethereum co-founder Joseph Lubin slammed Libra as a centralized wolf in a decentralized sheepskin.
Regulatory Impacts
Cryptographic currencies are important in emerging markets and are often highly regulated in developed countries. Just as Pony Ma remarked, “what really matters is the permission of regulations”.
National regulators have different opinions on Libra. Three European central bankers of Britain, France and Germany said Facebook should expect scrutiny on Libra to ensure it will not jeopardize the financial system or be used to launder money. Mark Carney, the governor of the Bank of England said the U.K. central bank would scrutinize Facebook’s crypto payments plan “very closely” and will collaborate with global forces including G7 countries, the Bank of International Settlements, the International Monetary Fund as well as the Financial Stability Board; Federal Reserve Chairman Jerome Powell stated his company will likely be wanting rigorously at Libra; The US House Financial Services Committee said it would hold a hearing to learn about the Libra plan.
Besides, major banks in various countries have also expressed their views on Libra:
The Bank of Japan, the Bank of Italy, the Bank for International Settlements, and Societe Generale of France all expressed concerns about the risks that Libra project may pose to the financial system. Anthony Healy, National Australia Bank’s (NAB — one of Australia’s ‘big four’ banks) business banking head commented: ”They’re not the first company to launch a crypto payment solution, but they do have immense reach obviously through their Facebook platform. With a billion plus users on its platform, it is clearly a threat.”
Prior to this, Gemini had already issued GUSD and JPMorgan Chase & Co had issued JPMcoin, both of them had triggered a ton of mixed reactions, but as of today, neither of them has caused great ripples in the global payment system.
Facebook has already entered the cryptocurrency realm, but there are still doubts and objections about Facebook’s globalization and borderless cryptocurrency program. Let’s wait and see how Libra develops and if it can meet Facebook’s expectations.
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