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Facebook's Libra could spark 'mass adoption' of crypto

Facebook's new cryptocurrency Libra could be “the first everyday implementation” of crypto, the world’s biggest cryptocurrency exchange said on Tuesday.

The Facebook-led project has the potential to spark “mass adoption” of cryptocurrencies, disrupt both banks and central banks, and even rival the dollar as a new global unit of account, according to Binance Research.

“The Libra ecosystem looks to be uniquely positioned to broaden the reach and impact of the crypto world through increased accessibility and participation,” Binance Research wrote in a report.

SAN JOSE, CA - MAY 01:  Facebook CEO Mark Zuckerberg speaks during the F8 Facebook Developers conference on May 1, 2018 in San Jose, California. Facebook CEO Mark Zuckerberg delivered the opening keynote to the FB Developer conference that runs through May 2.  (Photo by Justin Sullivan/Getty Images)
Facebook CEO Mark Zuckerberg speaks. Photo: Justin Sullivan/Getty Images

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The report, from the research arm of cryptocurrency exchange Binance, was based on the white paper for Libra, a new cryptocurrency set to launch next year. The project was unveiled on Tuesday and is spearheaded by Facebook but backed by a consortium of major companies including MasterCard, Visa, and Uber.

The new cryptocurrency will be backed by a range of global currencies and aims to give the estimated 1.7 billion “unbanked” people in the world access to cheap, universal financial services.

PARIS, FRANCE - JUNE 18: In this photo illustration, a visual representation of a digital cryptocurrency coin sits on display in front of a Facebook logo on June 17, 2019 in Paris, France. Facebook will announce Tuesday, June 18 the details of its cryptocurrency, called " Libra ". Like bitcoin, the best-known virtual currency, it will rely on blockchain technology. This universal currency must allow its users to buy products or services from the Facebook universe, which also owns Messenger, Instagram and WhatsApp. It will also be possible to transfer "Libras" between individuals. Several companies like Visa, MasterCard, PayPal and Uber have already joined the consortium created by Facebook. (Photo by Chesnot/Getty Images)
A visual representation of a digital cryptocurrency. Photo: Chesnot/Getty Images

Binance, which handles over $1bn of cryptocurrency trade daily, is extremely bullish on the project, saying it “has a chance at becoming the first ‘everyday’ implementation” of a global currency.

If successful, it could eat into revenues of banks who earn money by processing transactions.

“A new set of gatekeepers may emerge in the digital world which would threaten the existing positioning of banks as ‘payment facilitators,’” Binance wrote. “Based on the existing list of initial participants, one of the most interesting exceptions is the absence of financial institutions.”

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Libra is open sourcing its code and Binance compared the project to Facebook’s “Log in with Facebook.” This made it easy for companies around the world to enable secure log ins. A similar interface for Libra payments could “allow Facebook to act as a key player in e-commerce of the future, while reducing the costs yet again for companies and individuals alike to build and do business.”

Central banks could also be disrupted. They will have a tougher time managing things like capital flight or inflation if there is a global central currency that people can easily buy and hold on their smartphones.

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This would mean huge amounts of power put into the hands of private companies like Facebook that sit behind this new project.

The Libra launch documents make clear that Facebook will be just one of many companies involved in the project. However, its role in spearheading the development and its recent track record around user data will mean Facebook will have to be whiter than white to convince users Libra is totally independent.

“The ability for the Libra foundation to operate independently of Facebook, in a similar manner as the existing separation between monetary policy and fiscal policy that occurs in developed countries, will be a key factor for gaining the trust of the public,” Binance wrote.

Earlier this year, Binance CFO Wei Zhou told Yahoo Finance UK he was sceptical about Facebook’s crypto project because “one of the key things that we’ve seen is that the blowback against Facebook is it’s not a community driven organisation. Key decisions are made by one person.”


Oscar Williams-Grut covers banking, fintech, and finance for Yahoo Finance UK. Follow him on Twitter at @OscarWGrut.

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