We have been waiting for it since 2019, the Facebook stablecoin, Libra, could definitely be launched in January 2021 with a completely revised version. Indeed, contrary to the terms of the initial project, Libra will only be backed by the dollar. The public would have to wait months to see Facebook's stablecoin include other fiduciary currencies in its referencing basket. What should we take away from the announcement of the Libra's launch?
Despite the difficulties, Facebook will launch its digital currency
With these 2 billion users, the leaders of Facebook intend to carve out a place for themselves in the global financial system where the digitalisation of the sector is inevitable. As soon as the Libra project was announced, the leaders of the social network mastodon had to face the intransigence of the state authorities because its cryptomony is proving to be a real threat to traditional currencies. In addition, the stablecoin saw major key partners (Mastercard and PayPal) withdraw from the project.
Despite many of the above-mentioned difficulties, the project seems to be well on its way, as, according to the Financial Times, it is currently under review for approval by the Swiss financial authorities. Despite the departure of Mastercard and PayPal, 27 other members including Shopify, Coinbase, Spotify and Blockchain Capital have decided to support the Facebook stablecoin. A project that aims to solve the problem of accessibility to financial services.
Facebook Stablecoin: All you need to know about Libra!
Libra would be available on all platforms "made for Zuckerberg".
A Stablecoin is a digital currency backed by a store of value (fiat currency) whose purpose is to serve as a real antidote to volatility in the cryptomoney market. According to Facebook, Libra would be a "global currency and financial infrastructure" that can help combat the problem of financial inclusion in the world. It should be noted that more than 30% of adults do not have access to financial services.
Like other cryptomoney systems, Libra is powered by blockchain technology and Facebook's stable corner technology is the Libra network. But unlike other cryptos, it will be referenced to a traditional currency basket. Initially, the Libra's reserve basket should be made up of the dollar, euro, Swiss franc and yen, but for its first appearance on the market, the cryptomonnaie will be referenced only to the dollar.
The Libra has aroused the enthusiasm of several players but regulatory pressures are undermining the credibility of the project. The recent Facebook scandals on the misuse of data seem to be the perfect argument for regulators fearing instability in the financial system.
Currency Competition: What is the fear for the financial system?
Monetary authorities fear that the libra may substitute for hard currency.
With the rise of cryptos, particularly Bitcoin which has become the world's sixth largest currency, the issue of currency competition is becoming a major concern for central banks. As far as the Libra is concerned, the public authorities are afraid of the weight of the cryptomonnaie emanating from a structure with more than 2 billion users.
In addition, Facebook has been repeatedly pinned in data mismanagement scandals (Cambridge Analytica case). Because of the issue of data, the economy of crime is of concern to the authorities. There are fears that Facebook's currency is being used in asset laundering, terrorist financing and as a counterpart to cyber attacks.
What will happen to Bitcoin and other cryptomoney after the launch of Libra?
Bitcoin, ethereum, XRP and other cryptomoney have reached a major turning point with the health crisis. The rebound in cryptos is the result of the valuation effect and the loss of credibility of fiat currencies. The lack of regulation and the decentralisation of cryptos have contributed greatly to the upward trend of digital currencies this year.
If the Libra would be a blockchain-based cryptomoney, it would not be exempt from any regulation. This seems to be an advantage but also a disadvantage, as it would prevent strong speculation on the Libra as investors do with Bitcoin or Ethereum. Libra is clearly seen to fulfil the role of extinguisher of volatility on the cryptos market but also to prove to be a real alternative to the international payment system for users in developing countries who use its platform massively.
In the end, the launch of Libra will allow the cryptomatics sector to reach a plateau in terms of reputation, but in terms of market power, even with these 2 billion users, one wonders whether the stable corner of the market can really be reached.
Translated with www.DeepL.com/Translator (free version)
