3 Reasons Why Facebook’s Libra is Different from Other Cryptocurrencies
Facebook legally announced its cryptocurrency Libra in June 2019 which is expected to be launched in 2020.
Cryptocurrencies are thriving to gain confidence among the conventional circles that still prefer fiat over digital currencies. The news of Facebook launching its own virtual currency raised havoc in the world and initiated an unending debate started among the analysts, government authorities and Facebook representatives. There are people who support it and who are totally against it while many are still confused about the real face of facebook’s Libra.
Before discussing it further let's have a look at the timeline of Libra cryptocurrency. It all started in 2017 when Morga Beller started working on blockchain in facebook and later the vice president of Facebook moved to the blockchain region in May 2018. The libra coin was first revealed as “Facebook Coin” but later it was called Libra. It is a blockchain-based cryptocurrency that is envisioned to be used globally for easy fund transfers. Facebook legally announced its cryptocurrency Libra in June 2019 which is expected to be launched in 2020.
Facebook has set a tactical game board where it will use its global user base and unique structure of Libra to fight back the negative feedback.
Libra is not completely decentralized
Libra is not decentralized, it is controlled by an organization “Libra Association” based in Switzerland and Facebook as well. So Facebook's Libra is not completely decentralized while other cryptocurrencies are decentralized and based on blockchain where people can trade anonymously.
The anonymity in other cryptocurrencies is lacking in Libra. Libra plans to stay one step ahead of fraudsters by practicing stringent security measures. Facebook said. “We will be using all the same verification and anti-fraud processes that banks and credit cards use, and we’ll have automated systems that will proactively monitor activity to protect and prevent fraudulent behavior.” The previous cryptocurrencies never went this far in fraud prevention and security measures.
Libra is neither a cryptocurrency nor a stable coin and definitely not a fiat currency but it’s a competition to all of them
Libra is creating history with its unique structure. Facebook’s Libra will be backed by reserves of low-volatility securities such as bank deposits, and government securities in different currencies. The reason to maintain reserves in major fiat currencies is to reduce the risk of price volatility in Libra with fluctuations in fiat currencies. Otherwise, it would become just an exchange market commodity. Libra association plans to launch it as an easy way of transferring funds and making global online payments with low fees and in less time. Pegging it against cryptocurrencies makes it a stable coin but pegging it with securities denominated in several fiat currencies doesn’t even qualify it as a stable coin.
Also, none of the other cryptocurrencies threatened the fiat currencies. Given the planned fame and scalability of Facebook’s Libra, the governments fear it will take over fiat. Also, it is a point of concern for companies in the blockchain and cryptocurrency industry. The major investors of Libra are global businesses including Visa, Mastercard, and Facebook itself. These companies already have a global clientele, it will help them reach masses to market Libra.
Libra is facing tough regulatory challenges
The U.S government is giving a tough time to Facebook’s Libra. It seems like they want to refrain facebook from launching Libra by all means. Till October 2019, 21 bills on blockchain were in the pipeline to be passed by the Congress. 3 new bills were introduced that appeared to be created just to refrain Facebook from launching its cryptocurrency.
The bills “Keeping Big tech Out of Finance Act”, Stable Coins and Securities”, and “To Prohibit the Listing of Certain Cryptocurrencies” were proposed in October 2019 and they all seem like pinning down the launch of Libra. In case the bills are passed it will convert stable coins into securities and will also create problems for other stable coins. The high-end tech companies will not be allowed to launch any projects like Libra.
Not only the U.S government the Reserve bank of Australia also dismissed the cryptocurrency plans of Libra. Swiss president claimed Libra as a “failure” in its current form.
Given the negative feedback from the regulatory authorities, Facebook doesn’t seem like giving up. "Libra will not launch until the U.S. lawmakers' concerns have been answered,'' Said David Marcus from Facebook. None of the other cryptocurrencies struggled this much to get positive feedback from authorities. Also, till now authorities were not this rigid towards cryptocurrencies and stable coins.
The consistent behavior of Facebook is changing global cryptocurrency and regulatory landscapes. Regulators are entering into a new era of regulations where cryptocurrencies will be regulated. Although they were already on it, thanks to Facebook’s Libra the global authorities are planning on regulating this financial venture before some major loss may occur.