This is what the Facebook coin will look like
The popularity of BTC is rising and the amount of trades at exchanges increases every day. Therefore the social media giant presents the working paper for its own crypto currency. Although Facebook has numerous (size) advantages, there are also tricky questions to be answered.
On Wednesday, the curtain will be lifted over a strictly guarded secret. The social media group Facebook presents its own crypto currency, Libra, to the media. The public will be able to view the working paper (white paper) on 18 July. With a base of 2.3 billion users (with many fake accounts), Facebook has a market power that Fintech providers and credit card companies should worry about.
The crypto transactions are likely to take place via the subsidiary services Whatsapp, Instagram and Messenger, which already require a mobile phone number for identification purposes. The Facebook-Coin is to be used for transfers between Facebook users, in e-commerce and also for payments in “real” shops. The decisive factor will be whether the crypto currency becomes a purely internal Facebook program or whether it can also be used outside the system.
Further details that determine the success of the Facebook currency are also still open. We already know that Libra is not a currency of its own, but a stable coin. The value is tied to a basket of traditional currencies. As a result, the coin is immune to the high swings that plague many other currencies.
The stability of the currency is probably less of an issue in Europe and the USA. With the Libra, Facebook is probably targeting developing countries first anyway, where only a few inhabitants have a bank account. A market expert believes that in these countries the legislator Facebook will also “stand less on its feet”. Migrants who send part of their income back home could be their target customers, for example. Today they are often dependent on expensive services such as Western Union.
In the current interest environment, it will be decisive whether Facebook will pay interest on users’ credit balances. If so, this would be a first among crypto currencies. The huge customer balances could be deposited with the central banks, for example in the USA at an interest rate of over 2% at the moment.
The new currency would be managed by a foundation that Facebook recently set up in Geneva. This would make the Facebook coin a “Swiss currency” subject to local regulation. This foundation would also manage the currency basket on which the coin is based, making it a major player in the foreign exchange market.
The Facebook coin is due to be launched in 2020 at the earliest, by which time numerous legal obstacles will have to be removed, especially in terms of customer identification and cross-border transactions. For example, the Facebook coin could be classified as a security in the USA because of the basket deposited. The biggest question, however, is whether customers entrust Facebook with financial matters. The company has not given a good picture of privacy protection in the past.