So, yeah, Facebook is in the cryptocurrency business now.
TechCrunch has a pretty extensive “Everything you need to know about Facebook Libra” post that you can peruse at your own leisure. There’s no need to repeat their excellent work here.
Instead, we’ll focus on some of the reactions.
To help, Korean-language blockchain news website BlockInPress categorized the global reaction into five basic forms:
- Focusing on the prices. Some think by jumping into the blockchain industry, Facebook will lift the market for cryptocurrencies, including Bitcoin. Others worry that Libra will suck up demand and investment for existing coins. And then there are the Libra Investment Tokens…
- Hey, look, another stablecoin. Backed by real-world assets and short-term government securities, Libra functions as a stablecoin. This could make it a dangerous competitor for other stablecoins like Tether and USD Coin. Libra’s price stability could also pose a challenge for popular coins used for overseas remittances such as Ripple.
- Welcome to the regulatory party, FB. Facebook has to deal with the same regulatory hurdles everyone else in the blockchain space must overcome. Indeed, Rep. Maxine Waters, the chair of the U.S. House Financial Services Committee, is already gunning for them. She wasn’t the only one with concerns. The Korean-language daily Hankyoreh notes that regulatory uncertainty is why Apple, Google, Amazon, Microsoft and banks have decided to stay out of Libra for now. On the bright side, Facebook’s jump into the crypto space could encourage a bit of regulatory clarity that could help all the players involved.
- Where’s the decentralization? Critics contend that Libra is a centralized, permissioned network with a clear owner: Facebook. For its part, Libra plans to convert to a public blockchain in five years. There is also concern that Facebook is creating a global “shadow bank” with the power to influence whole nations.
- Wait and see. Some observers are content to sit back and watch how Facebook’s big blockchain adventure plays out. And if Facebook manages to universalize cryptocurrency payments and improve the user experience, it could prove a boon to the blockchain industry as a whole. So much the better.
For what it’s worth, this writer sits with the wait-and-see crowd. Maybe Libra proves the catalyst to the mass adoption of blockchain. Or maybe it’ll never be anything more than an over-engineered payment engine. Time will tell.
On the regulatory front, an official from Korea’s Financial Services Commission, the nation’s top financial watchdog, told the daily Kyunghyang Shinmun that they are “monitoring” the Libra project. An economist working on the design of a local blockchain-based remittance service, however, told the paper Libra could get blocked in Korea for conducting a fund-raising business without permission.
Libra might even have to do a bit of work just to use its own name in Korea. The nation’s patent authority reportedly turned down Facebook’s application to register Libra’s brand in May, citing four other pre-registered brands using the word “Libra,” including one by LG Electronics. Facebook apparently had the same problem in the United States, where it had to buy the brand name from another company.
Meanwhile, Yonhap News reports that Libra could pose a threat to credit card companies. A researcher for SK Securities said you could do a lot of things through Libra, including remittances, payments, loans and short-term finance. This could mean a bright future for Facebook, he said, but it could also throw financial companies into crisis.
Indeed, an official from a local payment engine said his industry regards cryptocurrency transactions as a revolution since they are commission-free and provide purchasers with a variety of benefits.
An official from a card company told Yonhap, however, that it would take a while for Facebook to build a stable payment system. He said card companies would respond to the challenge by emphasizing to consumers the stability of the existing system.
As an aside, one might also wonder how worried card companies really need to be with PayPal, Visa and MasterCard sitting on the Libra Foundation. This writer is old enough to remember when blockchain was supposed to pose a threat to big, centralized tech companies like Facebook. Yet here we are.
Yonhap noted that local companies were doing some similar things to Facebook, too, pointing in particular to social commerce giant TMON’s plan to release a blockchain-based payment service, Terra.
Decenter, the blockchain news website of the Korean-language business daily Seoul Gyeongje, asked four Korean blockchain professionals what they thought about Libra. In their view, though the network was insufficiently decentralized, it could also succeed as a business model.
One of the experts that was asked was ICON-founded blockchain accelerator Deblock CEO Hyun Oh. He said he believes Libra will be a good sign that could activate the entire market. Facebook was likely to succeed, he said, as it was using its existing service assets to offer new services such as payments, remittances and loansㄱ. As far as decentralization was concerned, Facebook need only use it when and where needed. He said it was efficient for Facebook to use blockchain only in its banking sector while maintaining its centralized structure elsewhere. The key now, he said, was not the decentralization issue, but rather how far Libra could promote mass adoption of blockchain technology.