Social media platform Facebook is set to release a white paper tomorrow detailing its plans for a cryptocurrency, believed to be called Libra, which will serve as the core payment technology used across its online platforms.
Reportedly backed by payment giants like Visa, Mastercard PayPal and Stripe, it has been speculated that Facebook Libra could also be used as a payment method outside of Facebook’s platforms and products.
However, with numerous regulatory challenges standing in the way, Facebook is not expected to launch its cryptocurrency until 2020.
As a result, it could be the wider cryptocurrency market that benefits most from tomorrow’s launch, cryptocurrency experts have speculated.
The Bitcoin price hit a new high for 2019 today, climbing above $9,000 for the first time in over a year – an increase that has been linked to Facebook Libra – and the price is expected to continue to surge.
“With the tech giant making a leap into the crypto space, I believe we could see Bitcoin surge as high as $12,000 over the coming week,” Samuel Leach, Director of Samuel & Co. Trading and creator of the Yield Coin cryptocurrency, told Verdict.
Facebook Libra: A friend or foe for Bitcoin?
The white paper will provide a greater idea of Facebook’s crypto ambitions. However, Facebook’s head of financial services and payment partnerships for Northern Europe has revealed that Libra will be a stablecoin based on a number of fiat currencies.
Stablecoins are, as the name suggests, stable. Tied to established currencies, these crypto assets are less prone to the volatility than cryptocurrencies. This makes them very different to assets like Bitcoin, which attempt to establish a currency that cannot be controlled or influenced governments, banks or businesses.
While Facebook’s cryptocurrency is expected to be regulated by a consortium independent from the social media giant, Libra will still be unable to provide the “truly decentralised, censorship-resistant” digital asset that Bitcoin offers.
“Bitcoin will always have an advantage as it is the only truly decentralised, censorship-resistant, supply-limited cryptocurrency. Facebook coin is not, as it is controlled by a centralised authority which can then choose how to govern it,” Alex Mann, Principal at Concentric, told Verdict.
As a result, there will likely be many cryptocurrency enthusiasts who are unwilling to accept Facebook’s cryptocurrency.
Making cryptocurrency mainstream
Despite speculation that a Facebook cryptocurrency could spell the end of Bitcoin, it is more likely that in launching its own cryptocurrency, Facebook will instead help Bitcoin and the wider cryptocurrency market to achieve the mainstream acceptance that it has long craved.
“We are seeing Bitcoin rally up to the announcement, and understandably so,” Leach said. “This could be one of the most reputable companies to get involved within the cryptocurrency space that has the user base to back the use case and on the scale needed.”
According to Eddy Travia, CEO of Coinsilium, by introducing crypto payments to its 2.3 billion-strong user base, Facebook will help consumers to accept cryptocurrencies as a normal way to purchase goods online:
“I see the large market exposure Facebook coin should achieve can only be a positive for the Bitcoin price and will contribute to the global awareness of crypto currencies and blockchain technology in general.”
However, the success of Facebook Libra will likely be determined by the ability to provide a seamless experience that allows payment with the ease offered by more traditional methods, according to blockchain expert Sukhi Jutla, co-founder of MarketOrders.
“Facebook will thrive if it is able to make the usage of their coins seamless, and as easy to use as fast cash,” Jutla told Verdict.
The technological barrier is often cited as one of the main issues holding cryptocurrencies like Bitcoin back from mass adoption — purchasing cryptocurrencies can be a difficult process for those that don’t really understand it. By solving this, Jutla predicts that use of Facebook’s cryptocurrency could snowball.
“The business model is heavily based on network effects which are critical to the adoption of cryptocurrencies,” Jutla said. “If one user starts to use the Facebook coin, there is a greater chance that other users will follow suit.”