By: Jenny Corlett
On June 18th, Facebook announced its plans for Libra, a cryptocurrency which is scheduled to launch in the first half of next year.
For those involved in marketing in financial services, particularly in crypto, this came as somewhat of a shock. This is due to the social media giant’s previous approach to marketing crypto. Under Facebook’s strict advertising rules, a large number of organisations found themselves unable to promote their offerings via the site. As a result, while the crypto industry has, on-the-whole, welcomed the announcement, some have also cried foul play.
However, regardless of motive, Libra has certainly made a splash. The announcement has been covered in every publication imaginable, and it has sent crypto prices rocketing.
But what does this mean for the market?
Libra is plugged as a low-volatility currency that allows users to buy things or send money to people with very low fees. It will be backed by reserves managed by the Libra Association, a nonprofit organisation set up by Facebook. This gives the token real-world value and oversees the governance of the blockchain technology that powers it. As it will be pegged to a selection of stable assets, its classed as a “stablecoin”, avoiding the volatility which we associate with traditional crypto.
Using the scale and network power of Facebook (which currently has 2.2 billion users), Libra could enable anyone in the world to pay for things and send money, regardless of location or territorial boundaries.
For the 1.7 billion people on the planet who don’t have access to bank accounts, this could be revolutionary.
It could also provide some much-needed competition in markets where it could undercut existing companies, such as those charging large fees for remittance services.
However, it’s still early days. The impact of Libra on the global financial system will depend on how reliable and secure it is, and whether it is deemed an acceptable alternative to other modes of payment in the eyes of consumers. There’s also a danger that it could reduce competition in some sectors. For example, given the weight behind Facebook, it could end up eclipsing other payment apps.
Irrespective of Facebook’s intentions, if done right Libra could certainly be a positive development for the lives of those who do not currently have access to bank accounts and be the first real challenge to the traditional banking system. For those involved in any aspect of tech or finance, this is definitely one to keep an eye on as it develops.
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