Facebook has announced that they are planning to launch a new cryptocurrency, the likes of which they are hoping to “transform the global economy”. But what does this mean for the almost ‘traditional’ crypto currencies such as Bitcoin, let alone the banks of the world?
Facebook’s new cryptocurrency which has been named ‘Libra’ is being developed solely by Facebook but they do intent to involve the likes of credit card companies, venture capitalists and other tech giants in a move to build something that will; in their aims, change the way in which we use money in the world, potentially decentralising the mainstream banks.
We are already seeing this happen slightly through the number of connected ‘app banks’ that are popping up across the Fintech world. The likes of Revolut and Monzo have taken the banking world by storm with their solutions that allow people to access their bank from their mobile phones, quickly and seamlessly without the need for branches and expensive infrastructure. Apple themselves are also moving into the banking fold by releasing the Apple Card, announced at the beginning of 2019.
When Libra has been launched, you will be able to send currency between your contacts using Facebook Messenger and WhatsApp, two of Facebook’s largest messenger Apps that could potentially allow unprecedented growth of the currency (user adoption depending…). This transferring method will be a way in which people can transfer mainstream money between people without borders. The long term goal is to have Libra as an accepted currency in stores and online.
Facebook, though, are facing a lot of scrutiny and backlash, coming long before the launch in the first half of 2020; this is due to their previous history of accusations around involvement and influence in political arenas as well as the fears around the security of the data on their platform. .
Maxine Waters; Chair of the House financial services committee has called on Facebook to put a stop on the development of the currency until regulators within congress could review it. There have also been calls for executives of Facebook to provide testament before the committee, to which they have agreed.
Back here in the United Kingdom however, the Bank of England Governer; Mark Carney, opened a cautious welcome to the new Facebook cryptocurrency. He explained how there was potential for Libra to substantially lower costs whilst increasing financial inclusion. He also told that there were climate and sustainability concerns around the way that the current system is being run.
The issues still stand regarding the history between governments, legislation and social media giants, in which it’s evident that the platforms are notoriously struggling with regulation; something extremely important when dealing with currency and money in this space. Mr Carney used this to promise that regulation would indeed be enforced in order to protect against exploitation and risks such as money laundering; all prepared in advance of the official launch.
Touched upon already but it’s important to see Mark Carney talking about the impact of the banking industry on climate change and the ways in which the industry itself should be doing much more to help safeguard the future. The Bank Of England will be among the first regulators in the world to include the costs incurred by climate change such as floods, droughts, property damage, crop damage etc; when assessing if financial institutions are strong enough to survive those particular crises.