Analyze how Libra on Facebook affects cryptocurrency, politics, and finance

In June 2019, Internet giant Facebook released a white paper called Libra. The white paper writes that Libra will use a basket of fiat money as an asset reserve, while Facebook's mission is to "build a simple, borderless currency and financial infrastructure for billions of people." Due to Facebook's network advantage, the program immediately caught the attention of the world. Therefore, Libra is likely to have an unprecedented impact on the global financial system.

Libra-4338939_960_720 (Source: pixabay )

In the past few days, a series of Libra-related projects have been released, but the publishers of these projects are not Facebook, Libra Association, Calibra Wallet or any other organization involved in Libra development.

First, the cryptocurrency exchange has announced a project called “Venus”, which will focus on developing “localized stable coins” on a global scale. Second, the People’s Bank of China says it is ready to launch government endorsements. Digital currency, and acknowledged the emergence of Libra to accelerate the development of digital currency; the youngest bitcoin millionaire Eric Finman launched a peer-to-peer cryptocurrency payment application called "Metal" and called it "Libra killer ".

Since the publication of Libra's white paper, regulators around the world have set up global task forces, and the United States has held several hearings, and many cryptocurrency companies have also launched competition projects.

Libra's initial release is expected to be in 2020, but given its large-scale regulation, its future is still difficult to determine. However, in just two months, it has had a huge impact on the field of cryptocurrency.

Regulating Libra

Libra is a digital asset similar to a stable currency and a blockchain-based financial infrastructure project. Earlier, a number of media reports said that Facebook is developing a cryptocurrency that will facilitate payments for its WhatsApp, Messenger and Instagram platforms. (The total number of monthly users for WhatsApp, Messenger, and Instagram reached 2.7 billion)

Libra aims to target approximately 1.7 billion non-bank account populations worldwide, with a focus on cross-border remittances. This makes Libra a competitor to companies such as Visa and MasterCard, as well as cryptocurrencies such as Ripple. (Visa and MasterCard have invested in Libra)

The project will be managed by the Swiss-based non-profit alliance Libra Association, which has 28 founding members, including MasterCard, PayPal, Visa, eBay, Coinbase, Andreessen Horowitz, Lyft and Uber.

Facebook's subsidiary Calibra is also developing a digital wallet that facilitates Libra trading, while some third-party wallets will also support Libra. As its developers stated, the software that supports the Libra blockchain is open source. Once libra's wallet is online, all social media users can use Libra to make payments.

For this reason, Libra immediately triggered regulatory dissatisfaction, which led to a new round of discussions on the legal status of cryptocurrency at the national level. Since Facebook’s previous involvement in leaking privacy scandals has made it a major focus for global regulators.

In July of this year, the US Congress began a hearing on Libra's release, and Calibra's chief executive David Marcus accepted two questions in Congress. The important message we can get from these meetings is that Facebook will not launch Libra until the regulator's concerns are fully resolved. Marus has assured members and investors. At the same time, the EU anti-monopoly regulator also launched an investigation into Libra, which cast a shadow over Libra's release.

In addition, US lawmakers, including Libra's Democratic Congressman Maxine Waters, are heading to Switzerland, where the Libra Association is located, to meet with Swiss Federal Data Protection and Information Commissioner Adrian Lobsiger to exchange views on digital currencies.

In a commentary to Cointelegraph, TradeBlock's research director and digital currency trading tool provider John Todaro summarized the main reasons why regulators stepped up their review of Libra:

Libra's focus on regulatory authorities is mainly due to Facebook's size, resources, and its ability to integrate a low-cost, efficient digital currency payment channel across multiple platforms, which may make Libra more widely available. Other projects did not receive the same level of attention, mainly because they did not have the ability to make their stable coins quickly adopted, and Facebook could do that.

Experts said that although Facebook's project is still immature, it is reasonable to show strong opposition in regulation. Konstantinos Stylianou, assistant professor of competition law and regulation at the University of Leeds, told Cointelegraph that the sooner regulators think about the potential problems Libra brings, the better. He said:

It is correct for financial regulators to take the lead in taking action because the purpose of financial regulation is to ensure that Libra and similar products meet established standards before they are launched. Other regulators, such as the European Commission's antitrust division, have recently started investigating Libra, and they need to prove whether Libra will bring real harm. The regulator's close attention to Libra is intended to stop the illegal activities.

Other experts, such as the chairman of the Swiss blockchain identity network Concordium and former CEO of Saxo Bank, Lars Seier Christensen, were even surprised that Facebook did not anticipate the attitude of the regulator. Christensen explained to Cointelegraph:

In fact, I fully understand the concerns of regulators because Libra has raised a number of major issues and the scale of the project is very large. I think the pace of Facebook is going a bit faster. Because many of the concerns about systemic risk, money market chaos, and moral hazard are easy to predict, these problems could have been resolved from the start.

Libra's competitors

When the above jurisdictions were busy discussing the potential options for regulating Libra, China took a different approach. The Facebook project proved to be the main driver for accelerating China's development of digital currency.

It is worth noting that at a congressional hearing, Marcus warned legislators that vetoing Libra could lead the United States to fall behind in developing digital currency:

I believe that if the United States cannot lead innovation in the digital currency and payment sectors, then other countries will catch up. If we do not act, we may soon see a digital currency controlled by other countries.

China accelerates development of digital currency

According to a recent report, after several years of research and system development work, the People's Bank of China is ready to launch the central bank digital currency (CBDC). Yang Dong, director of the Center for Financial Technology and Cybersecurity at Renmin University of China, said that the launch of the Libra white paper has prompted developers to include more private institutions in the development and distribution of CBDC.

Chen Zhuling, co-founder of the decentralized cloud computing network Aelf, wrote in an email to Cointelegraph:

Considering the full application of mobile payments and e-money in Chinese society, the Chinese government will also consider issuing digital currency. More than half of the world's bitcoin hash rates are in China, so the Chinese government is no stranger to cryptocurrencies.

Patrick Dai, co-founder of the blockchain platform Qtum, is optimistic about CBDC. In an interview with Cointelegraph, he said that the Chinese central bank’s digital currency will have a huge market and will challenge the “monopoly” of local giants WeChat and Alipay:

Compared with Facebook's Libra, the digital currency launched by the People's Bank of China will have a greater impact and will accelerate the large-scale use of cryptocurrencies. People don't trust Facebook projects. Introducing a new asset class will also bring healthy competition to China's financial technology ecosystem. Currently, China's financial technology ecosystem is dominated by a few major players. Free payment solutions help break the monopoly of payment giants such as WeChat Pay and Alipay.

Of course, CBDC and privately issued cryptocurrencies can coexist, Professor Stylianou said:

Central bank cryptocurrencies and private cryptocurrencies are not zero-sum games. Adopting one of them does not affect the adoption of the other. They are likely to coexist, just as goods supplied by countries in all other industries coexist with privately supplied goods. Of course, this only applies to free capitalist economies.

Coin Announces "Venus"

Libra also has some competitors from private companies. The cryptocurrency exchange's project will be Libra's most powerful competitor. However, as the company’s CEO, Zhao Changpeng, pointed out, they “will coexist”.

The open source blockchain project of the company is named "Venus", which focuses on the development of localized stable coins based on the currency chain. It is reported that the currency chain has a broad user base and has established global compliance. Measures. The Chinese announcement issued by the currency security shows that it has to challenge "financial hegemony." For Cointelegraph's request to clarify the relationship with Libra, Coin Security has not responded.

In addition, global retail giant Wal-Mart has filed a patent for a Libra-denominated digital currency. The retail giant says it can provide "another way to handle wealth through an institution that meets most of their daily financial and product needs" for low-income households (for whom, the high cost of banking). In addition, Wal-Mart also suggested in the document that it may further challenge existing banks by reducing the demand for credit and debit cards.

Libra also provoked responses from small, cryptocurrency-oriented startups that promoted themselves as "Libra killers." For example, Erik Finmann, known as the youngest bitcoin millionaire, recently released a peer-to-peer cryptocurrency payment application called "Metal," which claims to support cryptocurrencies such as Bitcoin and Ethereum.

Despite the difficulties, Libra’s influence is still growing

Although we are not sure whether Libra can successfully overcome the current regulatory obstacles, its impact on the cryptocurrency industry and the entire financial community is obvious. TradeBlock's Todaro told Cointelegraph:

Libra's influence on the industry is so great that other large corporate entities and governments have accelerated the process of their stable currency projects, such as Wal-Mart, the People's Bank of China, and the currency security.

Stylianou tells Cointelegraph:

The emergence of Libra competitors is only a matter of time. Surprisingly, it all happened so quickly. But most projects that claim to replace Libra will be extinct within a few years.

As a result, Libra is actively influencing the cryptocurrency sector that is still in its infancy and promoting the development of similar stable currency-based projects. At the same time, it also attracts investors' attention. Companies interested in Libra include the owner of the cryptocurrency Japanese cryptocurrency Coincheck, the online broker Monex Group, and even the Winklevoss brothers.

In addition, some early investors were reportedly disappointed by Libra's immature strategy and Libra's strong regulatory resistance to withdraw from the project.