Why Facebook's introduction of Libra could be the turning point for cryptocurrencies
By David Macnamara on Tuesday, 25 June 2019
The announcement this week that Facebook is set to launch a new cryptocurrency, Libra, signalled what many feel could be the turning point in, not necessarily when cryptocurrencies went mainstream, but certainly when they became a whole lot more tangible. It is a development that has been expected for some time, (we predicted that one of the FAANGs would enter the currency market back in January) and, now that it is almost here, we need to consider how it could affect us and our pockets.
For many years, Facebook CEO Mark Zuckerberg floated the idea of introducing a currency within his platform that would allow users to buy, sell and send money to others, instead of using existing fiat currencies. His dream of it "being as easy to send money as it is to send a photo" may be a utopian ideal, but, for a company who faces so many questions about how it handles the privacy of its users, the proposed introduction of Libra on the world's largest social network has led many lawmakers and banking officials to express serious reservations about the proposal.
The bitcoin bubble that so enraptured cryptocurrency evangelists three years ago brought the idea of there being an alternative to pounds and dollars into the mainstream. Here at Teamspirit, we have lost count of the number of times clients have come to us looking for help with launching their latest potential coin offerings. However, for a company with the reach of Facebook (with its more than 2.7 billion active users) to promote a new currency means it is very likely that we will all soon have the ability to trade using a cryptocurrency for the first time.
When you consider it, the advantages Libra would have on our daily life could be manifold. We can all relate to the simple purchasing process we see every day on Instagram: you see a pair of new trainers, you like the trainers, you click to buy, you enter your details and the trainers arrive at the office the next day. With the introduction of Libra, that 5-step process could be cut by 40%! From a marketing point of view, we would be dancing in the streets if someone told us there was a way to cut our drop-off rate by that much.
Another point to consider is that, as our economy moves further and further towards a cashless society, if you can find yourself an employer that will pay into your Facebook account, is that really any different to being paid into your bank? If Facebook can be properly regulated and held to account, then what difference does it make, if it's all on the same blockchain platform?
What is really interesting is that this development may finally force Governments to wake up and recognise the need for the banking system to be truly modernised. Everything, from taxation to benefits, mortgages and loans can become an opportunity to not just join the 21st century, but set itself up for the 22nd and 23rd. We need governments to look beyond their own terms and plan for what comes decades ahead.
Of course, that's not to say that Libra doesn’t have its downsides and there are many reasons to fear its introduction. One of the main concerns expressed by experts has been that, since the currency might not feel like "real money", people will be less responsible with it. It is one of the key unwritten rules of Las Vegas: people are always more likely to bet their plastic chips than real coins and bills. If they were laying down their own cash on the felt, they would probably be a bit more circumspect with the wager. Also, Facebook themselves cannot really consider themselves to be bastions of virtue given their recent history, so can we really trust them to be responsible with the means to feed and clothe our children? Finally, can we realistically expect lawmakers to police a new wide-spread financial technology when they have proven themselves to be so inept at dealing with the existing problems that already plague our financial industry?
This week's announcement has brought comments from across the spectrum of the finance world. The Governor of the Bank of England Mark Carney said that the Bank would be keeping an "open mind" on the plans. Other regulators hailed Libra's potential to introduce more competition to the banking sector. Having previously been dismissive of the likely impact of cryptocurrencies, a company of Facebook's size may change their outlook. Meanwhile, US policymakers were quick to voice their disapproval of the venture, claiming that Facebook already has a lot to make up for, given its past sins, before it can be considered a credible financial powerhouse.
So what's the Teamspirit take on Libra? We welcome it, but only if it can bring about real change and help to establish a fairer, more accountable financial industry. While its potential is vast and the opportunities it presents to consumers great, we share many of the same concerns that others have expressed: tech giants already wield a lot of power over all of our lives and we must be very wary of surrendering even more of our personal freedoms, even if it makes getting those brand new trainers just a little bit harder to buy.