Facebook’s “seismic” virtual currency

Facebook, on June 18, said it would release the Libra virtual currency, scheduled for official trading from early 2020. Described as a global financial-monetary infrastructure, Libra was affirmed by Facebook’s leader “not created for the purpose of replacing major central banks”. However, this currency is evaluated by analysts to create a global seismic in the financial industry.

With more than 2.4 billion Facebook users every month, Libra has the ability to change the face of the financial market, according to The Guardian. Bloomberg in the recent article said that if successful, Libra could turn Facebook into a ‘big player’ in the financial industry.

Compared to the rest of the money market built on blockchain technology, Libra has two distinct characteristics: how to manage and operate.

Unlike other virtual currencies that are also based on the Blockchain, Libra is not created by “digging”, but this currency is issued based on a real amount of collateral. Simply put, this digital currency is created in the same way that central banks around the world issue paper money.

In the newly published White Paper, Facebook claims Libra is a “stable currency”, due to its value attached to real assets. Basically, the only way to increase the number of circulating Libra is that users use other currencies, such as US dollars, euros, yuan or yen to buy Libra and this amount is considered “assets.” guarantee “the amount of Libra this person owns.

“Facebook introduced Libra at the moment as a turning point for the company’s operations and the money market,” said Mark Mahaney, an analyst at RBC Capital Markets. “In terms of size and importance, we believe this new financial platform may be similar to the time Apple introduced the IOS operating system for developers more than a decade ago.”

The amount of Libra collateral will be placed in banks or invested in low-risk lucrative assets, such as US government bonds, but the profits are not distributed to Libra owners. used for the operation of this currency management organization, such as funding for research activities or social activities.

This pre-system is also managed by an organization called Libra Association – an independent, non-profit organization based in Geneva, Switzerland. The organization has two main functions: authenticating transactions using Blockchain Libra and managing Libra volumes related to social purposes.

Companies that contribute at least $ 10 million are considered to be founding members of Libra Association, and there are now 27 technology companies that claim to be partners with Facebook, including some big names like Paypal, Ebay, Spotify, Uber, Lyft, Visa, Mastercard …

However, with the influence of social networks of 2.4 billion users, Facebook may face many barriers before bringing Libra to consumers.

According to Bloomberg, the new announcement from Facebook immediately faced opposition in Europe, with a call to adopt stricter regulations.

French Finance Minister Bruno Le Maire said Libra should not be considered a replacement for traditional currencies. At the same time, the head of the French financial agency called on the group of 7 central bank governors to prepare to report on this project right in the July meeting.

“Libra has undoubtedly become a legal currency,” Le Maire said in an interview with Europe 1. “This is an impossible and impossible problem.”

In the context that Facebook is suffering from numerous criticisms of privacy violations, the new move in the financial sector also draws attention from regulators and privacy advocates worldwide. gender. According to The Guardian, the US and UK authorities have expressed concern about the plan to encroach on Facebook’s financial sector.

In May, members of the US Senate Committee on Banking, Housing and Urban Issues wrote to Facebook CEO Mark Zuckerberg asking for questions regarding privacy and regulations. finance.

“It is important to understand how large social platforms use data available in ways that affect the financial life of consumers,” the content of the letter is written. “More importantly, understand how large social platforms use financial data to profile and select target customers.”

Prospects of digital currencies in 2019

Some experts said that after a hot development period, the digital money market will have a reorganization and elimination of inappropriate currencies in the coming time.

Market is not quiet

The digital money market in general and Bitcoin in particular had 1 year of unfavorable transactions. The value of Bitcoin has fallen from the peak of nearly $ 20,000 / BTC in early 2018 transactions to $3,500 in the last trading session of 2018. Thus, within nearly a year, Bitcoin lost nearly 80% of the value.
Similarly, many other digital currencies also have strong corrections. The second popular Ether – electronic currency after Bitcoin also dropped from $1,432 / Ether in January 2018 to about $150 / Ether at the moment.

Besides, 2018 also witnessed the failure of Bitcoin Cash. Contrary to the expectation of outstanding growth in early 2018 with the ability to replace the Bitcoin, this digital currency also experienced a sharp decline in the last months of 2018.

The prospects

Judging by the prospects of digital currencies in 2019, many experts think this may be a year of growth again. However, the Bitcoin currency may continue to lose against other currencies. The recent lackluster development of Bitcoin and the lack of technical support in general will lead to the collapse of this currency. As technology companies invest in Blockchain technology and spend the time and energy needed to nurture new digital currencies, some experts believe that Bitcoin will not be able to grow in keeping with the growth of other digital currencies.
According to Samuel Leach, virtual money expert and founder of Yield Coin, Bitcoin may not be able to follow the upward trend of cryptocurrency in 2019, even when some countries recognize the value of money. The main reason lies in investors’ apprehension before the strong fluctuation of this currency in recent years.

The most likely possibility for Bitcoin is that the currency will continue to receive recognition from a number of portfolio swaps (ETFs) and futures markets. Bitcoin will remain a highly speculative trading instrument for some, but will not become a popular means of trading and storing value, Leach added.

Meanwhile, compared to Bitcoin, other currencies appear to be ripple, often with a team of solid engineers standing behind to support constantly, help develop and ensure the stability of currencies in the future.

In addition, in that context, stable currencies (stablecoin) that are designed to counter strong volatility and unstable prices in the electronic money market will quickly rise to dominate market share. Previously, Bitcoin failed to become a stablecoin due to unpredictable fluctuations and strong price fluctuations in a short period of time. The value of bitcoin fluctuates according to the speculation trend and the purpose that traders are willing to buy and sell.