Ahead of its launch, Facebook’s Libra is already making waves. With the cryptocurrency, Facebook (FB) is seeking to provide a more efficient, low-cost, and secure payment tool. However, Libra is facing pushback from regulators in the US and China.
Facebook expanding its empire into the cryptocurrency sector does not come as a surprise—it underscores the company’s push for emerging opportunities amid rising demand for digital payments. Furthermore, the cryptocurrency market is thriving thanks to peer-to-peer transactions and cross-border refinancing. Transparency Market Research expects the global cryptocurrency market to grow by a spectacular 31.3% compounded annually between 2017 and 2025.
Why is Facebook launching Libra?
Libra, with a backing of more than 2 billion Facebook users, is sure to be a success. It’s also backed by Visa (V), PayPal (PYPL), and Lyft (LYFT), set to play a pivotal role in collecting financial data and facilitating transactions with their payment networks.
The fact that nearly half of the world’s adults don’t have active bank accounts presents a unique opportunity for Facebook. Consequently, Libra promises to be a game-changer in areas where people cannot access banking services. The tech giant has already unveiled Calibra, which will act as a digital wallet for Libra. Powered by blockchain, the digital wallet would allow people to send Libra to anyone with a smartphone. Ultimately, the cryptocurrency’s goal would be to make it easy for people and businesses to pay bills, buy items, and send money.
Why Facebook’s Libra might not see the light of day
Despite the benefits up for grabs with Libra, there’s a chance it might not see the light of day. Soaring regulatory pressure poses a significant threat to the ambitious project. US Financial Services Committee chair Maxine Waters wants Facebook to proceed slowly with its Libra ambitions, waiting for appropriate regulations governing cryptocurrencies to be in place.
However, regulators have failed to come up with any concrete regulations, making it unclear whether Facebook will be able to address all of their concerns. As it stands, the lack of regulations raises serious doubts about Facebook’s Libra coming to life in 2020.
Lawmakers are not the only ones opposed to Libra. US Treasury Secretary Steven Mnuchin has pointed out that money launderers and terrorists could misuse Facebook’s cryptocurrency. Federal Reserve chair Jerome Powell has echoed those concerns, suggesting Libra could fuel money laundering because of its decentralization.
Mark Cuban on Facebook’s crypto
Sharing similar sentiments is billionaire investor Mark Cuban, who insists that Facebook’s cryptocurrency is a big mistake. According to Cuban, Libra could disrupt unstable countries.
The US also perceives Facebook’s cryptocurrency as a threat to national security. Whereas the country currently holds veto power over global financial transactions, increased cryptocurrency use could reduce the US dollar’s preference as legal tender in world commerce.
China’s concerns about Facebook’s Libra
China wouldn’t be impressed with Facebook’s Libra taking over mobile payments, either. For the longest time, the country has tried to replace the US dollar with the Chinese yuan as the preferred means of global commerce. Facebook’s Libra could complicate matters even further.
Facebook turning a good number of its 2.4 billion users into Libra holders is sure to disrupt the payment space. As it stands, Alibaba’s (BABA) Alipay and Tencent (TCEHY) WeChat account for a huge chunk of mobile payments in China. However, given Libra’s decentralized nature, many people may switch to the cryptocurrency.