This month will be crucial for Facebook’s (FB) Libra project. In the coming weeks, Libra Association members will start committing to the cryptocurrency project formally. And their commitment is important, as Libra has run into government resistance around the world. In the US, lawmakers and bank regulators have sounded their worries about Libra. In Europe, Germany and France have vowed not to allow Libra. A top official at the European Central Bank warned against Libra’s “treacherous promises” last month.
Facebook’s Libra project needs strong support from members
“For Libra to succeed it needs committed members,” Libra lead executive David Marcus tweeted on October 2. He also disclosed that Libra members were reaffirming their vows to the project.
His comments came in response to a Wall Street Journal report about cracks in the Libra Association, the group set to manage the Libra cryptocurrency network. The report stated that Visa (V) and Mastercard (MA) are reluctant to commit to the Libra project formally, a statement Marcus appeared to dismiss.
Libra promises to open new revenue opportunities for Facebook
Facebook wants to develop Libra into a global digital currency. It has said that Libra would reduce transaction costs and expand financial inclusivity. In fact, Facebook has set up a financial services subsidiary, Calibra, that will provide Libra-related services.
Presently, Facebook derives almost all of its revenue from advertising sales. However, the ad market is becoming more challenging. Competition from Amazon and others is growing, and Facebook’s Federal Trade Commission settlement has forced commitments that will affect its advertising business. Calibra could help Facebook in its business diversification efforts. Facebook also hopes Libra will make advertising on its platform more accessible to small businesses, thereby boosting its ad business.
There are over 90 million small businesses with Facebook profiles that could be viewed as potential advertisers. However, Facebook currently has only about 7.0 million active advertisers. Facebook doesn’t accept cash payments for advertising spots. Therefore, small businesses that operate primarily in cash may have a hard time purchasing ads on its platforms.
IBM open to working with Facebook on cryptocurrency project
Facebook unveiled Libra in June with 28 inaugural members drawn from diverse industries, including financial services and ride-hailing. The Libra Association expects to admit more members, reaching 100 members by the time Libra launches next year. IBM (IBM), currently not in the Libra Association, has said it is open to working with Facebook on the Libra project.