Facebook to use cryptocurrency

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Content:

• Facebook’s ‘cryptocurrency’ Libra has nothing to do with Bitcoin
• U.S. lawmakers say Facebook cannot be trusted to manage cryptocurrency
• Should you care about Facebook cryptocurrency?
• Facebook’s crypto failure is a red flag for its Metaverse plans
• Facebook set to bet high on Libra crypto
• Facebook Unveils Libra Cryptocurrency, Targeting 1.7 Billion Unbanked
• What was the Facebook cryptocurrency Diem and why is Zuckerberg selling the assets?
• Would you trust Facebook with your money? What Libra cryptocurrency means for users

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Facebook’s ‘cryptocurrency’ Libra has nothing to do with Bitcoin

Finance is a key sector for the economy. Therefore, any significant innovation in this field deserves to be analysed with caution, and its implications, well understood.

This is what we seek to do in this article with the Libra project. In addition to the considerations above, the size and scope of Facebook imply that Libra has the potential to become systemic.

The widespread use of Libra could have major implications for financial stability, some of which are summarised below :. The keys to understanding how new technologies are substantially transforming the economy and how society works. Sign up. About CaixaBank Research. Financial markets. Monetary policy. Oriol Carreras Baquer. Roser Ferrer. October 17th, Download File. In this article. A brief history of cryptocurrencies: from Bitcoin to Libra. Up until now, cryptocurrencies have been considered more as speculative assets than as money itself.

The main reason is that their value has tended to be unstableand they have not demonstrated a clear advantage over existing alternatives.

For all these reasons, they have not reached a critical mass of users. In addition, these cryptocurrencies do not adjust their supply according to their demand, causing even more volatility. In this context, stablecoins seek to minimise the volatility of cryptocurrencies. To do this, the issuer of the stablecoin links its value to that of another more stable asset, such as fiat currencies e. To date, however, stablecoin initiatives have had a limited user base , since they are promoted by companies that are either new entrants facing high costs to promote the adoption of their product Tether or that target wholesale JPM Coin.

In addition, there are doubts over their scalability because, for now, it seems unlikely that the projects presented to date can process the number of transactions that are processed per second through conventional electronic means of payment.

The Libra project. Libra is presented as a private, digital and global currency, and as an alternative means of payment based on blockchain technology. In fact, Facebook has written its own blockchain code and has announced that the transactions will be verified between servers of the members of the Association 4 permissioned network in order to speed up transaction processing times and serve millions of accounts, 5 although the goal is for it to eventually do so in a decentralised manner.

Libra has a high potential for adoption since its promoters have a large user base. Specifically, Facebook has the biggest social network in the world, with over 2. Furthermore, the other members of the Libra initiative are big players that are well established in the payments and mobile applications markets.

In short, Libra has a potential scale that other initiatives lack. Libra is a stablecoin: its value will be linked to a selection of international currencies. To support its value, the Association aims to maintain, in the form of reserves, deposits and investments denominated in major international currencies, such as the dollar and the euro, for an amount equivalent to the Libras it issues.

The evolution of the value of Libra, therefore, should go hand in hand with the currencies that make up the selection. Those wishing to buy Libras will have to do so through authorised distributors exchange bureaus and banks , which will be able to buy Libras from the Association in exchange for the aforementioned major currencies and sell them on to users in exchange for their local currency.

The Association will invest its reserves in liquid and low-risk assets, such as bank deposits denominated in stable currencies and short-term government debt securities of countries with a good credit rating. It is anticipated that the performance of such assets will serve to cover operating costs and pay dividends to the founding members. Libra aims to be an alternative payment vehicle and to reduce friction in international transactions. A global stablecoin such as Libra, aimed at retail use, can make cross-border payments and transfers cheaper and easier to carry out by reducing transaction costs.

Furthermore, it can reach users who do not currently have access to the financial system, by allowing them to store their money 6 and execute transactions using their mobile phone. In fact, the project is also introduced as a tool to promote financial inclusion for the more than 1. Doubts over Libra. Up until now, the Association has not specified how it will store and manage this information, nor what measures it will implement to ensure they remain properly protected.

Fight against illicit activities. The traditional digital payments system is not anonymous, as transactions are processed and recorded by third parties the bank of the buyer and of the seller, and the card company. In the case of Libra, on the other hand, as it is a cryptocurrency the exchange of money could presumably take place in a decentralised and anonymous manner. Therefore, it is not clear how compliance with these regulations will be ensured. Risks of abuse of dominant position.

There is a fear that the promoters of Libra could use their current position, which is dominant in some cases, to encourage the use of Libra over other alternatives, which would represent a constraint on innovation. Implications for financial stability. However, if Libra becomes systemic in its proportions, this commitment should be reinforced through appropriate regulation and supervision.

Libra could contribute to the generation of global episodes of financial instability. If doubts over the cryptocurrency were to arise, for instance for security reasons, and there were a mass selloff, it is not clear whether the Association could meet this demand if a portion of the reserves are invested in assets that are subject to a certain liquidity risk.

In addition, the pressure on banks balance sheets in which the Association is a depositor would inevitably increase. Libra can facilitate international capital flows because it substantially reduces the transaction costs associated with cross-border transfers. This offers clear benefits, but it could also have significant implications for the financial stability of many emerging economies because, by boosting and facilitating capital flows, it could amplify capital outflows in the event of changes in investor sentiment and risk aversion.

However, if residents can easily exchange their local currency for a set of stable currencies through Libra, they will take refuge in this asset at the slightest hint of problems in their economy.

This could lead to significant episodes of depreciation of the local currency and make it difficult to maintain price stability. Financial stability. Digital currency. Financial regulation. Long-term trends.

Technology The keys to understanding how new technologies are substantially transforming the economy and how society works. All about Long-term trends. Eduard Llorens i Jimeno.

U.S. lawmakers say Facebook cannot be trusted to manage cryptocurrency

This site uses cookies to deliver website functionality and analytics. If you would like to know more about the types of cookies we serve and how to change your cookie settings, please read our Cookie Notice. By clicking the "I accept" button, you consent to the use of these cookies. Facebook Inc said on Monday it would not proceed with the launch of its Libra cryptocurrency until regulatory concerns are addressed, as the U. Treasury secretary took the unusual step on of saying he had serious concerns it could be used for illicit activity. Speaking with reporters, Mnuchin said he was not comfortable with Libra currently, particularly in guarding against money laundering and other illicit use. Mnuchin is the latest senior U.

Should you care about Facebook cryptocurrency?

The stalling of Facebook's plans for libra doesn't necessarily mean the end for a Facebook-issued digital currency. But it did ignite an important conversation about the future of money as we know it. Ben Edwards ,. When Facebook announced plans last year to create its own digital currency, called libra, it was only a matter of time before lawmakers, already riled by the Cambridge Analytica scandal, would push back. China, he warned, was already moving quickly to launch a similar idea. Lawmakers have been reluctant to get on board. In early-March, Bloomberg reported that Facebook and the Libra Association, a group of private companies supporting the project, were rethinking the idea, potentially turning libra into a payments platform , which multiple coin issuers could use. Facebook has spent a lot of money and a lot of resources on this initiative; they need to get something off the ground, so for them this is the most logical starting point. Many central banks around the world were also spooked into action. A January survey from the Bank for International Settlements showed that the number of central banks planning to roll out a digital currency in the short term had shot up to one in ten from one in twenty a year earlier.

Facebook’s crypto failure is a red flag for its Metaverse plans

Ernest Foo does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment. Cryptocurrencies have become a global phenomenon in the past few years. The announcement has sparked fears that Libra could be a threat to traditional banks , warnings to be cautious , and sceptical commentary of claims that it will help developing countries. Read more: With cryptocurrency launch, Facebook sets its path toward becoming an independent nation. Currency is a system of money that is commonly used in exchange for goods and services and, as a result, holds value.

Facebook set to bet high on Libra crypto

The upcoming digital currency is expected to launch in the first half of and is being backed by 27 other firms and organisations, including Uber, Spotify, Mastercard, eBay and Vodafone. Like bitcoin, Libra will be based on blockchain technology. This tech is powered by a series of computers, which means it is not controlled by one central authority and therefore offers users more privacy. Facebook says that the virtual currency is aimed in particular at the the 1. Although Libra and bitcoin both fall under the cryptocurrency umbrella, they serve different purposes in the wider market.

Facebook Unveils Libra Cryptocurrency, Targeting 1.7 Billion Unbanked

Facebook's announcement in of plans to design a cryptocurrency and payment system raised immediate red flags for global finance officials, who expressed a barrage of criticism about the security and reliability of a private network. Diem Networks' US CEO Stuart Levey said in a statement that the initiative made progress, but "it nevertheless became clear from our dialogue with federal regulators that the project could not move ahead". Silvergate bought development, deployment and operations infrastructure, as well as tools for running a blockchain-based payment network for payments as well as cross-border wire transfers. Pressed by regulators' concerns about a currency managed by a private company, the project was previously entrusted to an independent entity based in Geneva. After the defection of several major partners such as PayPal, Visa and Mastercard, the organisation scaled back its ambitions, before renaming itself Diem at the end of The so-called stablecoin - a type of digital money tied to other kinds of assets - never launched. Facebook, which renamed itself Meta in October, has faced criticism on the dominant position it holds online, yet it is not the only powerful organisation interested in crypto. The European Central Bank in July formally launched a pilot project to create a "digital euro", in response to the growing popularity of electronic payments and the rise of cryptocurrencies.

What was the Facebook cryptocurrency Diem and why is Zuckerberg selling the assets?

Facebook's announcement in of plans to design a cryptocurrency and payment system raised immediate red flags for global finance officials, who expressed a barrage of criticism about the security and reliability of a private network. Diem Networks' US CEO Stuart Levey said in a statement that the initiative made progress, but "it nevertheless became clear from our dialogue with federal regulators that the project could not move ahead. Silvergate bought development, deployment, and operations infrastructure, as well as tools for running a blockchain-based payment network for payments as well as cross-border wire transfers.

Would you trust Facebook with your money? What Libra cryptocurrency means for users

Last June 18, Facebook announced the creation of a new subsidiary, Calibra, which will be developing a digital wallet for a new cryptocurrency, Libra. Libra will be powered by a blockchain technology going by the same name. It bears repeating that Libra, much like any cryptocurrency, will be a digital currency that only exists online and operates using peer-to-peer technology. More specifically, Libra will be backed by a collection of low-volatility assets, such as bank deposits and government securities in currencies from stable and reputable central banks, which should protect Libra against major value fluctuations. Another fundamental aspect of cryptocurrencies is that their operation is intrinsically linked to blockchain technology. In fact, cryptocurrencies can only be bought and sold using blockchain 7 or other similar technology.

We use cookies and other tracking technologies to improve your browsing experience on our site, show personalized content and targeted ads, analyze site traffic, and understand where our audiences come from. To learn more or opt-out, read our Cookie Policy. Bitcoin derives its value from risk and scarcity, and making a profit off it is inherently difficult in addition to a huge energy suck. And despite years of fervor about a magical future made possible by the blockchain, bitcoin is still basically a niche currency, not widely used for everyday transactions or even peer-to-peer payments. Libra payments will be written into a new blockchain, which is still being built. Making it, also, more stable than bitcoin. But what does it mean, exactly, for you?

This future is a lot closer than you think — just a few months away. Then, a new player will emerge and try to change the game. Considering there are more than 2. Facebook joined forces with 27 organizations to introduce the new cryptocurrency to the world in