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Could IBM Consider Working with Facebook’s Libra Association?


Oct. 1 2019, Updated 11:29 a.m. ET

IBM (IBM) appears to like Facebook’s (FB) work on creating a global digital currency. Jason Kelley, head of IBM’s blockchain services, spoke with CNBC about Facebook’s cryptocurrency project and its potential benefit to the blockchain world.

According to Kelley, IBM is open to partnering with like-minded companies across industries on developing blockchain solutions. However, Kelley did not say whether IBM is preparing to join Facebook’s Libra Association, which would run the Libra cryptocurrency network.

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Facebook launched its cryptocurrency project in June. It also unveiled 28 inaugural Libra association members, a list that includes PayPal (PYPL), Uber Technologies (UBER), and Spotify (SPOT). Eventually, the Libra Association aims to have 100 members by the time the cryptocurrency launches. As a result, we believe there is still room for IBM if it wants to become part of Facebook’s Libra Project.

Facebook and its Libra Association aim to launch the cryptocurrency sometime next year. Currently, the group is working on securing regulatory approvals for Libra. As we discussed on September 11, the Libra Association has sought a payment system license in Switzerland for Libra.

While IBM isn’t currently clear on its Libra Association membership, it believes the Libra Project could lend more legitimacy to blockchain technology. IBM has developed a blockchain-based solution to help bring more transparency in the food supply chain. Walmart (WMT) and Kroger (KR) are among the retailers that have adopted IBM’s blockchain-powered food tracking technology.

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Facebook, Libra, and Calibra

Facebook has high hopes for its cryptocurrency. Firstly, Facebook hopes Libra could reduce payment costs for consumers and expand financial inclusivity. Plus, Facebook expects Libra to boost its business diversification efforts.

Libra’s launch could allow Facebook to operate a financial services subsidiary called Calibra, which would include a digital wallet for Libra cryptocurrency. We believe this subsidiary could be a source of non-advertising revenue, helping Facebook reduce its reliance on the advertising market.

In addition to creating a new revenue stream for Facebook outside the advertising market, Facebook also expects Libra to boost its core advertising business. For example, Facebook hopes Libra will enable more small businesses to become advertisers on its platforms. Advertising remains Facebook’s primary source of revenue.

Facebook’s advertising business would welcome a boost, as the market has become more competitive. Amazon has become a significant threat to the dominance of Facebook and Google in the advertising market.


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