Facebook’s cryptocurrency comes at a time when the blockchain has potentially become the backbone of the FinTech industry. Post the invention of Bitcoin; there have been numerous things built on the blockchain. Nevertheless, the most important of them all is its ability to store and send value.
Earlier in 2008, Bitcoin was built as a cash system that would work independently of the Federal Central Banking Authorities, i.e., it enabled holding value without the need of banks. Facebook has planned something similar with a couple of changes. Reportedly, the Coin will be backed by a backed of currencies to buffer the effects of economic shifts in specific world currency.
Impact on the Financial World
For Bitcoin [BTC] and cryptocurrency investors, this is a marquee moment, Facebook’s stablecoin: Would or wouldn’t Globalcoin/Libra increase the marketability of Bitcoin and other cryptocurrencies. If yes, then how. Mati Greenspan, the Senior Trade Analyst at eToro, is hopeful, he tweeted,
“Facebook coin isn’t a competitor to Bitcoin, it’s a competitor to the Dollar.”
Caitlin Long, Crypto-analyst also weighed six possible effects that Facebook’s Globalcoin could have on Bitcoin. Facebook’s Globalcoin would potentially challenge the current banking system of the world. Banking institutions could start losing the required liquidity to run their entire business.
Moreover, Facebook has planned to raise a $10 billion initially for buying the privilege to set up nodes. This opens up an opportunity for gaining interest from the money. A trust or an independent not-for-profit organization could be employed to manage it. Even banking institutions that are experts at handling FIAT could provide services to them.
While the legal implications and possibilities are many, the most important thing about the cryptocurrency is the fact that would shine a light on so many doubts around Facebook and the cryptocurrency market regulation.
Data Privacy and Cryptocurrency Regulations
Privacy and the exploitation of user data have been two of the most daunting questions of the past few years, with evidence of misuse rampant. Furthermore, cryptocurrency requires KYC and AML compliance to avoid money laundering, which is a far greater threat the Facebook coin imposes. Hence, Facebook’s data would now be enriched by a lot, which is highly apprehensive.
It will also clear the cloud on the actual number of users and would help the firm eliminate the garbage that has been filling up space. Facebook might or might not have an estimated 2.3 billion users. Long noted in the blog post,
“Governments everywhere will view Facebook’s cryptocurrency as a huge honeypot of data about how users spend money—with all the privacy and tax reporting implications that data honeypot entails, because every transaction would be traceable by governments.”
Last but not least, Long also predicted that Facebook’s coin would accentuate the value of Bitcoin. According to her, Bitcoin will remain to be the ultimate store of value. She said,
“Here’s my biggest prediction: Facebook’s foray into cryptocurrency will end up benefiting bitcoin.”
How do you think Facebook will affect the other cryptocurrencies? Please share your views with us.