It’s been several months since Facebook (Nasdaq: FB) unveiled the plan to bring out a cryptocurrency, probably a move aimed at entering the lucrative financial services business. The market’s early response to the idea was not very encouraging, and the stock suffered initially when a section of market watchers took a skeptical stance.
According to a report by The Wall Street Journal, the social networking platform will be officially announcing the launch of Libra, its own cryptocurrency, next week.
What makes the crypto debut special is that the company secured the backing of some of the leading payment service providers and financial services firms, including PayPal (PYPL), Mastercard (MA), and Visa (V). Booking.com and Uber (UBER) have also been roped in to fund the development of the new digital currency with initial investments of $10 million each.
If the venture takes off as planned, it will be a win-win deal for Facebook and its new associates. While both sides bet on Facebook’s huge user base for taking Libra to the masses, the financial companies also get a chance to be part of the high-profile payment service planned by Facebook.
If the venture takes off as planned, it will be a win-win deal for Facebook and its new associates
To make transactions seamless and ensure independent governing of Libra, a consortium called Libra Association will be formed with the participation of the partner firms. Though the idea looks impressive on the face of it, it needs to be seen whether users and regulatory agencies would find the whole arrangement convincing enough.
The data breach controversies surrounding Facebook and its growing clout in the cyberspace could be cause for concern for the market when the social media giant steps into a sensitive area like financial service. Also, the security measures that need to be adopted before the currency hits the market would be huge, considering the prevalence of cyber crimes and financial fraud on the internet.
The bottom line is that Facebook will have to obtain a plethora of regulatory approvals and undergo intense scrutiny by various agencies before fulfilling its cryptocurrency and financial services ambition.
Libra is designed to initially facilitate the transfer of money through the Facebook platforms WhatsApp and Messenger, with an option to involve e-commerce platforms in the future thereby allowing people to make payments and buy things online. It is learned that once the digital currency becomes sufficiently popular, kiosks on the lines of ATM will be set up to make the conversion of cash into the crypto version easier.
Facebook shares traded up 2% in the early hours of Friday’s session. The stock has gained 33% so far this year.