When Facebook thought about Libra, it wasn’t a brand new idea. Currently, in China, there are two systems for transactions and money transfers in place, AliPay and WeChat Pay, with a combined user mass of about 1.6 billion people, making credit card transactions obsolete.
It seems quite likely that Facebook’s Libra was inspired by these two Chinese platforms, but what seemed a fantastic idea, is facing intense criticism by financial authorities, industry leaders and the political establishments, specifically within Europe and the USA.
China is not an issue, as even Facebook is banned from operating inside that country. Russia, though, seems less concerned by Libra than the rest of Europe. In an article published by Quartz (qc.com), its author, Matthey De Silva, analysed this fact.
He writes that on July 1st, Deputy Finance Minister Alexei Moiseev stated that no one is going to ban Libra in Russia, although he also noted that the Ruble is the national currency and all transactions should be calculated using it.
He contends that Russia is a cryptocurrency friendly country, as they are using bitcoin to finance certain secret operations such as the email hack of the Democratic National Committee in 2016. He went on to state that Russia has been benefiting from money laundering coming from Europe.
Winners, Break-even and Losers
Bitcoin, cryptocurrencies, and Blockchain Startups
The birth of the Libra project is already driving up the price of most of the top 20 cryptocurrencies, with Bitcoin being the top winner, showing an increase market cap that is right now above 62% of the total capitalisation of the crypto sector.
Libra’s announcement has sparked renewed interest in Blockchain, too. Amazon’s Managed Blockchain had already raised interest, and it seems that AT&T, Nestlé and Accenture are each experimenting with it. Last May, a low-code blockchain platform launched by SalesForce which allowed its users to manage it through a graphical user interface instead of programming to create apps was introduced. All these events are very good for the cryptocurrency sector.
Libra will need two kinds of partners in order to construct a successful project: Finance institutions to hold its funds and crypto exchanges to link it to the crypto world, which would allow Libra to be exchanged to other currencies, crypto and fiat.
That has been clearly spotted by Binance and also ShapeShift, both of which announced that they will integrate with Libra when it becomes available.
“It’s too early because it doesn’t exist yet, but I would love to integrate Libra into ShapeShift when it does exist”, said ShapeShift CEO Erik Voorhees As reported by cryptoglobe.com. The same article and others report on Binance talks with Facebook.
We have had official dialogue with Facebook. With regarding to listings specifically, right now they are going to be on a so-called ‘private chain.’ So that means they won’t be looking for external liquidity.
Initially, Ripple may seem a loser against Libra, but as of now, it may be a winner. The road to success will be long and difficult for Libra. On the other hand, Ripple has been running for some time and is a well-known solution for the banking establishment. If the finance industry wanted to create a fast and proven solution to compete against Libra, the choice of Ripple might be an optimal solution.
Frank Chaparro posted a tweet on Jun 20th which said that Ripple CEO Brad Garlinghouse said that the Libra announcement has helped Ripple to push forward some contracts.
.@Ripple CEO Brad Garlinghouse says Facebook Libra announcement has helped push forward some contracts it has in the works with other finserv companies: "This has been a call to action. This is going to be a record week for Ripple."
— Frank Chaparro (@fintechfrank) June 20, 2019
Stablecoins are clearly needed on the exchanges in order to make pairs transactions or allow investors to hold funds stable while cryptocurrencies are perceived to move downward. The question is if the advent of Libra will change that to let Libra be the stable coin against which to trade other cryptocurrencies.
This issue is not quickly answered because Libra will be moving similar to how a currency index does. Therefore, for many, it will be more desirable to trade against its own currency, Euro, Dollar or Pound or Yen. To others, it might be convenient to shift to Libra, since their domestic currency would be a worse solution.
Current Remittance Services and Cards
Western Union, MoneyGram and other payment services such as Paypal, Skrill, BitPay will face hard times competing against Libra. We should see movements soon to shift or integrate their services in real-time transaction networks, allowing customers to do what Libra is promising.
The Dollar (and other Fiat Currencies)
The Dollar is the de-facto universal currency against which other currencies trade. More than 90% of the 5-trillion dollars in transactions made each day in the Forex markets involve the dollar. Although Libra proponents claim that their currency will be backed by a basket of monetary assets, the fact is that if this cryptocurrency succeeds in becoming the new global currency of the XXI century, the dollar will lose its dominance as the fiat money that everyone buys.
Can you imagine the power of the capacity to print an unlimited amount of green paper bills which every nation on earth is willing to buy? Can you also think of how devastating it would be to the economy which is losing this huge market within the next five years?
To a lesser degree, the Euro, the Pound and the rest of the majors will be affected by Libra’s success as well. Their influence in the economy of the nations holding them might be smaller than the dollar, but the combined effect should impact it profoundly — the possible counterbalance to this event being Libra’s success.