Libra is the cryptocurrency of Facebook. The social media giant is aware of the popularization of Bitcoin and other currencies and is betting on the future of the global economy belonging to blockchain-based technologies. Therefore, Facebook has great expectations for its new project.
Libra has not been launched yet. The currency is expected to start circulating in the second half of 2020. There are still a lot of speculations about how it will work, and whether it will at all. Facebook has already announced some of the main features of the new currency, which have been widely criticized in the crypto world and have received negative opinions worldwide.
“Sending money should be as easy as sending a photo,” said Mark Zuckerberg.
The main goal of the CEO of Facebook, Instagram and WhatsApp is quite ambitious: to make Libra the largest cryptocurrency in the world. In order to achieve that, he partnered up with other big corporations, such as Uber, Lyft and Spotify. All these companies, and even some non-profit organizations, are part of the **Libra Council **which is responsible for making decisions about the direction of the new currency.
The main idea is that users of large social networks belonging to Facebook can make transactions from their profile with just a few clicks. To give you an idea of the possible impact of the project – just Facebook on its own has 2.4 billion users, all of whom will be able to use the currency directly, without having a bank account. Libra’s effective functioning requires the scope of social networks. According to a report byThe Economist, Libra will create “incentive programs” for companies and service providers such as discounts and offers to make transactions using the new cryptocurrency.
One of the big differences with Bitcoin is the idea of basing Libra’s value on a basket of fiat coins such as the dollar, the euro, the yen, etc. The new cryptocurrency units will only be generated with real money transactions. This will give greater stability to the value of Libra, avoiding the fluctuations to which we have become accustomed to with the current cryptocurrencies.
According to Facebook, another advantage of Libra will be the low fees charged in transactions. If blockchain has been able to revolutionize the digital economy, considerably lowering the cost per transaction, the new currency will supposedly make these values even lower.
Facebook will create its own virtual wallet, Calibra, from which users can make transactions with their cryptocurrency. However, according to the company, other wallets will also be able to work with the cryptocurrency, so as Libra does not become a monopoly of Zuckerberg’s company.
As we have seen, Libra’s claims are enormous. However, the project is causing great fears both in the crypto community and in the general public. Some of the founding companies, such as Visa, Mastercard, PayPal and eBay have already abandoned the project.
The privacy issue
Blockchain enthusiasts fear that the project may end up with losing one of the main advantages of current cryptocurrencies: the decentralized network, which allows users to own and trade money independently from regulatory institutions, as well as gives users the complete anonymity when it comes to carrying out operations. Additionally, there is a fear that the involvement of such a large company may destroy the other cryptocurrencies.
The issue with regulation
However, the biggest challenge for the emergence of Libra comes from international financial regulators and governments. The issue is so controversial that in the United States Zuckerberg was forced to testify in the National Congress to clarify some points about the project.
If all Facebook users transferred part of their funds to a Calibra wallet, the website would become one of the largest financial institutions in the world with a budget of billions of dollars. This would undermine the ability of central banks to act in the economies of their respective countries, as well as diminish the influence of institutions such as the IMF or the World Bank, giving the company unimaginable power of action.
For these reasons, the project may not come to fruition. Due to such pressures the company’s CEO has stated that Libra will not operate until all US regulators approve it.
Conclusion: What is the future of Libra?
With all the criticism and regulatory problems it has suffered, Libra’s future is still uncertain. Recently, Facebook launched a digital payment platform, Facebook Pay. This platform, which is still only available in the United States, allows users to make payments through Facebook, Messenger, Instagram and WhatsApp.
The new app allows users to transfer money without the need to have a bank account. However, it does not use blockchain and there is no new cryptocurrency being created, so all transactions are managed by Facebook itself.
To conclude, it is speculated that the Libra project will remain on hold for some time. Perhaps the new payment platform is a test for the future currency; or, on the contrary, a second choice in the face of so many legal difficulties, as the company may give up the crypto project. Hopefully, if it does come to fruition, it would offer a great user experience and be managed well.
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