Mille Lees, Wednesday 19th June 2019, 8:14 AM CEST
facebook Project Libra

Facebook’s Project Libra

Facebook Project Libra, in the last few weeks, has been making headlines in the cryptocurrency industry for their new, worldwide financial system named GlobalCoin. Dubbed as Project Libra to the development team, this project has already become partners with Uber Technologies and Visa Incorporated to create this new cryptocurrency. This coin will be a one-day trade offering, just like the USD.

The new cryptocurrency coin is estimated to launch somewhere in the second quarter of 2020 as a StableCoin. It’ll be the first StableCoin to be supported by Government currencies and securities. The endgame for Facebook with Project Libra is to create a coin that avoids large fluctuations, which in turn will allow for everyday transactions for anyone registered with Messenger or WhatsApp.

Project Libra has already been in development for the last twelve months, with Facebook creating growth on its other platforms to exceed past its 2 Billion active users. However, all of the social media giant’s efforts are coming under scepticism from blockchain regulators. They’ve indicated that they believe Facebook maintains too much power and that it will allow them to avoid specific digital privacy policies. This could ultimately result in a significant attack on Libra’s systems, allowing for the GlobalCoin to be sold on the worldwide online black market without the knowledge of Facebook.

Facebook GlobalCoin

However, if GlobalCoin can become successful in the cryptocurrency industry, then Facebook will become a significant player in the worldwide financial markets. There will inevitably be competition for the social media giant, as other major company’s like JP Morgan are entering the blockchain and cryptocurrency markets as well.

Regulatory Hurdles

Facebook announced Project Libra with a total of twenty-seven partners. The crypto coin has already undergone extensive regulatory scrutiny, demanding that the social media giant implement more defence protocols to safeguard the client’s private data. The company has already seen significant interest in the crypto payment platform across the globe in countries like India & South America. Clients using this platform will be able to transfer the GlobalCoin through Facebook Messenger, WhatsApp and Instagram.

Shortly after Facebook revealed GlobalCoin a few weeks ago, the social media giant’s shares dramatically increased, with company investors seeing the new project streams potential. Financial analysts everywhere are shocked by how fast this coin is gaining momentum with Mark Mahoney, an RBC Capital Markets Analyst, stating: “We view Facebook’s introduction of the Libra currency as a potential watershed moment for the company and global adoption of crypto. In terms of scale and importance, we believe this new financial infrastructure could be viewed similar to Apple’s introduction of iOS to developers over a decade ago.”

Furthermore, the announcement of Facebook’s GlobalCoin has been met with fierce political opposition amongst European Banks & Financial Institutions. All of them are demanding that tighter regulation be enforced on to the social media company. There have even been notable figures like the French Finance Minister urging investors and traders not to think of GlobalCoin as a tradition currency. The minister also implored the Group of Seven Central Banks to be sceptical of the coin. During an interview with Europe Radio 1, the minister stated: “It is out of the question that Libra becomes a sovereign currency. It can’t, and it must not happen.”

Due to regulators in Europe & beyond demanding the enforcement of GlobalCoins regulator, it will be hard for this StableCoin to match the US Dollar in terms of worldwide acceptance. It’ll be hard for the coin to be trusted with banking and financial institutions both imploring scepticism to Project Libra.

Facebook Moves Forward

This social media giant isn’t backing down so, though. Immediately after the backlash they received, Press Representatives with Facebook read a statement from Mark Zuckerberg, “This statement is to help instil trust in our new currency and gain widespread adoption during its infancy, it was guaranteed that a country’s notes could be traded in for real assets, such as gold. Instead of backing Libra with gold, though, it will be supported by a combination of it low-volatility assets such as short-term government securities and bank deposits in currencies from reputable and stable central banks.”

Facebook Crypto Project FaceCoin

This statement did provide solace to numerous investors, as it was now known that the digital coin could be issued out whenever clients wanted to trade it with other fiat and stable cryptocurrencies. This means that the price won’t fluctuate dramatically, no more than the average StableCoin. The Head of Project Libra, David Marcus, confirmed that GlobalCoin would also be audited on a bi-weekly basis. This will be the first crypto coin to have financial audits, which is needed in an industry with incredible transparency.

David Marcus, before being the Head of Project Libra, maintained Messenger for Facebook. He’s publically confirmed that the development team is creating a new digital wallet that will exist in Messenger, Instagram Direct Message & WhatsApp. Once the project is launched in the second quarter of next year, family and friends will be able to send money to one another more efficiently than ever before. This will be accomplished through a databank network that is maintained through a computing centre. These large databanks will work coherently together to guarantee transactions are verified and sent immediately. A new subsidiary called Calibra is supporting these new networks.

Facebook’s Failed Services

Facebook doesn’t have a strong track record when it comes to commerce and payments products. This could be why so many banking institutions fear what GlobalCoin can do to the worldwide markets if it’s widely adopted and then fails. It was only a few years ago that this social media giant allowed consumers to purchase an Uber through Messenger, or purchase virtual goods through their website with Facebook Credits. Then in 2013, the company started a partnership with PayPal, which today accounts for only 2% of the total revenue that PayPal earns yearly. It appears that all previous efforts in the payments and commerce markets space have failed for Facebook.

GlobalCoin is also considerably late to the crypto party, with multiple coins already in circulation today. Facebook will have difficulties having traders using Bitcoin, Ethereum or LiteCoin to use their new cryptocurrency. The company faces additional hurdles when it comes to United States Financial Regulations. Developing a digital currency isn’t just as simple as registering a business, as multiple government bodies in America will need to approve of GlobalCoin before it can be circulated. The Securities and Exchange Commission in the USA has denied twelve crypto tokens in the past. However, the Project Leader has confirmed that Facebook has been in contact with financial regulators in America since the very beginning. Calibra has yet to receive any “No Action” letters from the commission.

The Association

One way that Facebook plans to guarantee the success of GlobalCoin is through the “Libra Association”. This is a collection of some of the biggest companies worldwide. Acting as a governing body, they’re tasked with making critical decisions that will affect the regulation and growth of the company. Two firms that are a part of the association include PayPal and Visa, which Facebook considers to be co-founders of GlobalCoin.

project libra

David Marcus, who is the former president of PayPal, continued his statements by saying: “Facebook will not have any special privilege or special voting rights at the association level. We will have competitors and other players on top of this platform that will build competing wallets and services.”

All companies that are a part of the Libra Association have had to place a minimum of $10 Million to reserve their spot in the association. This money will be used primarily to help support the valuation of GlobalCoin. Furthermore, the Buy-In also allows for members to have voting privileges on the coins future undertakings. However, there has yet to be any charter implemented on the governing structure of the currency. Most of the group’s members haven’t been, and it appears that the association is in flux.

The Federal Trade Commission

The announcement of GlobalCoin has come as a shock to most financial analyst, is currently the social media giant is being investigated by the Federal Trade Commission. This investigation is the result of the company having unsafe privacy practices, which resulted in a large number of consumers having their data stolen from Facebook. It’s resulted in a primal shift in the company’s executives, with Co-Founder Chris Hughes and Elizabeth Warren both being removed from Facebook. There have been demands from consumers to have stronger privacy measures, but still, none have been implemented.

Furthermore, Facebook hasn’t been overly complimented with the Federal Trade Commission in this investigation. Lawyers working for the company have debated night and date with the FTC on how the financial data of Project Libra should be kept separate from the user data. They’ve also worked to guarantee that a large portion of user financial data that was lost isn’t revealed either. This causes for significant concern on GlobalCoin & Facebook as a whole.

However, David Marcus, in one final statement of reinsurance, stated, “There’s a clear distinction between Calibra and what Calibra has access to, and what Facebook Inc. has access to. It’s apparent that people don’t want their financial data from an account to be comingled with social data or to be used for other purposes.”

Author: Mille Lees

Millie has been with since the start. She has a passion writing financial news after an internship at Bloomberg London. Millie's background in journalism and politics means she has an eye for a good story. Millie graduated from LSE and has a masters from Durham University England. Mille Lees can be contacted at [email protected], View all posts by Mille Lees

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