By CCN Markets: When it comes to what’s gone wrong with Big Tech, the only surprise you would expect is if Facebook was missing from the list. From data privacy violations to aiding genocide to enhancing the spread of fake news, the social media giant has become a global ignominy.
But for Facebook, those are trivial inconveniences, and the social media giant is now eyeing the financial services niche. The $0.5 trillion company has already confirmed plans to launch a cryptocurrency known as Libra and has reportedly invited Visa, Mastercard, PayPal, and Uber to invest $10 million each in the effort.
Facebook’s New Cryptocurrency, Libra, Gets Big Backers https://t.co/LexEcHUbLS
— Levan Ramishvili (@levanrami) June 14, 2019
Unfortunately, the reaction from a section of the crypto community has been to sneer at the effort.
But truth be told, Facebook has identified an unfulfilled need – a fast, easy-to-use, low-cost cross-border payments system that’s universally acceptable to regulators. Facebook understands that banks fail on this due to the high fees and the slow speeds. It also understands that currently, crypto might not be universally palatable to regulators alongside other shortcomings of course.
Zuck Eyeing the Whole World
To solve regulatory hurdles, Facebook CEO Mark Zuckerberg has held meetings with central bankers, government officials, and other regulators around the world. And just as Zuckerberg identified MySpace’s weak points before dominating social media, he is doing the same with cryptocurrency. And with the partnerships that have been revealed, he is now assembling the arsenal.
While there are properties of true cryptocurrencies that Facebook’s digital currency does not threaten, such as the store-of-value proposition, anonymity, and deflationary features, it is a threat to crypto with regard to the one feature that’s a promising route to mass adoption – a fast, cheap medium for digital transactions.
Why Would Financial Giants Take a Risk with Facebook?
Facebook’s choice of partners is telling. By bringing in global financial services firms that are readily accepted by governments the world over, the company is perhaps hinting at what has prevented crypto from gaining mainstream adoption. And for these financial services firm to stake their reputation with Facebook, it means there’s a lucrative opportunity that has been spotted.
Besides the financial investment, Visa, PayPal, and Mastercard are bringing in dozens of years of industry experience gained around the world. Last year, Visa was the leading card issuer in the world by purchase transactions. Mastercard was third.
Meanwhile, PayPal has a 58.49% market share in online payments processing.
The inclusion of Uber Technologies is the most interesting. It could mean that Facebook already has a guinea pig for the digital currency during the pilot phase. Who knows, a ride in an Uber will probably be one of the first services Facebook users will pay for using Libra?
Facebook Soon-to-Be the Biggest Bank in the World?
On their own, the synergies created by this effort are not to be underestimated. Combined with Facebook’s 2 billion-plus users, the reach and scale of Libra takes on monumental proportions.
Despite the seriousness of Facebook’s digital currency efforts, Libra will, of course, continue to get the flak from the crypto community. It will be pointed out that it is not a true cryptocurrency (and in my opinion, it is not). But Facebook users are unlikely to be bothered by this and the reasons are clear – if Libra enables them to transact in a frictionless way with anyone and everyone, why would it matter to them that it does not conform to the Cypherpunk’s Manifesto?