Facebook just announced the “Libra”, a new stable coin and sort of an international payment vehicle selflessly designed to help the underbanked of the world. It shall be backed by a basket of real currencies and be usable via Facebook’s social media portals.
How will this affect the existing financial world?
Astonishingly Facebook seems to have garnered support by existing financial incumbents like Visa, Mastercard, and Paypal. A cheap new crossborder payment system should be strong competition for those financial stakeholders. Perhaps these money juggernauts thought, if we can’t stop it, it’s better to be on board and try to control it.
In any case, despite the huge user base of Facebook, there is still a long way to adoption and the competition will not fall asleep. Payment processors like Paypal have an existing infrastructure and people who have money already have an account with them. Companies with the first mover advantage, like Paypal and Visa, will be able to accommodate their fees if that should be necessary.
Facebook itself suggests that it is not after the data and not inclined to lead the structures that reign the Libra. Instead it wants only a fraction of the voting power of how the protocol of the Libra blockchain gets developed and also only a fraction of the direct earnings, e.g., interests earned by the backing capital.
So, what is the intention of Facebook then?
It is simply to cement and expand the monopoly of Facebook, the private internet within the Internet, the vampire that seduces the masses and sucks their brain blood.
For now, the Libra is only a white paper, but it already drew criticism by central bankers and politicians. No wonders here, the mighty and the rich don’t want others to print money and circumvent their sole right to do so.
What does that all mean to Bitcoin and other coins?
On the positive side, if the Libra is based on a blockchain, it should be easy to list this new coin on existing crypto exchanges. It then could function as an additional onramp to get funds easily into these exchanges. It also would lower the psychological barrier to get involved with Bitcoin and co.
Seen that way it should have a positive effect on crypto prices.
The other side of the crypto coin looks like this: Regulators, governments, and central banks will be more alarmed than ever, which will likely result in more harsh regulations.
As we wrote in our latest Bitcoin report (hyping the bitcoin), there are forming dark clouds on the coin horizon. The FATF (Financial Action Task Force) will probably soon recommend the impossible, namely to tie sender and receiver info of all crypto payments to all transactions of wallet and exchange service providers. Practically that would mean this info had to be written into the respecting blockchains, which is not possible. Game over for the crypto exchanges?
Given the enormous greed of Facebook for data, the ever increasing lust of governments to snoop around and force the strangest things, and the not so anonymous Bitcoin blockchain protocol, the outcome could be:
The rise of privacy oriented crypto coins
Monero is what comes at first to mind. XMR trades currently at about $100 and has a market cap of $1.7 billion.
Then, shortly behind Monero, we have Zcash with a current price of about $106 and a market cap of $720 million.
Both cryptocurrencies offer a privacy oriented philosophy that is incorporated technically into their blockchain protocol and ideologically into their developer communities.
Other coins may follow.
The day the news broke that some EU law enforcer, the honorable Europol, had shut down a Bitcoin mixer claiming that it got used mainly by criminals wanting to erase their money trails, the Ethereum lead developer and icon Vitalik Buterin announced that some new code designed to strengthen its anonymity (a bit) will go into Ethereum soon.
Facebook, of course, suggests that it will honor all regulations (with Libra essentially becoming a money tracing and data collector tool) while at the same time respecting all possible privacy demands.
The more Zuckerberg is claiming the impossible, the more Monero, Zcash, and other anonymous coins will slip into their future role of being the real cryptocurrencies. Then, one sunny day, Bitcoin (after Litecoin) itself will become more private.
Libra — freedom made by Facebook.
As it turns out, this is not a joke. More freedom offered by Bitcoin and the other coins will be the real effect of the Libra, probably accompanied by a higher market value of crypto land in whole.
Amazingly the Libra could also become the first real stumbling block for Facebook, as it might stir up headwinds for this e-monkey housing matrix. Perhaps the Libra will even spur calls to break Facebook into its parts and effectively reverse the buy out of Whatsapp and Instagram.
Could the Libra free us from Facebook eventually?