(BTC) has been rising in value over the last couple of weeks, floundering above $12,500 on 8th July and falling back to $10,500 this week. The bearish price action is catalyzed by several factors. Today, many financial experts believe that the emergence of ’s dubbed “Libra” or Globalcoin is a contributing factor to the price fluctuations. The venture from the social media giant is likely to validate the idea of digital currencies. That might just work in favor of BTC and its rival like .
Facebook’s Crypto Libra
The crypto community has been on its toes for almost a year now following ’s involvement in this space. The social media powerhouse has been working to build a cryptocurrency-based payment system. Former Instagram and PayPal executives and a renowned technologist David Marcus are part of the team driving the project.
Not until recently, the crypto community was not privy to the developments. However, it is now clear that the Silicon Valley darling is working around the clock to launch their own . The approach is to build a and back it up with a “basket” of . Libra or Globalcoin is expected to be a digital medium of exchange for the extensive ecosystem. The coin will be availed through physical automated tellers, exchanges, and through a purported reward system.
Countries Gearing Up for Libra
The popularity of Libra has pushed major countries like the US, UK, and Japan to take some action. Following president Trumps concerns that cryptos like and Libra could be used to fuel illegal activities, the US Treasury Secretary now stresses on compliance. In a recent press statement, Mnuchin insists that all , including ’s Libra, must adhere to the Anti-Money Laundering and Counter-terrorism policies.
Moreover, the United States Senate Banking Committee has revealed the opening statements of ’s head of Calibra wallet, David Marcus. The statements are being heard today, July 16, in the US Senate where Marcus is set to testify. In general, the testimony will clarify the upcoming Libra and its associated Calibra digital wallet. More importantly, Marcus will have to convince the Senate on the regulatory frameworks that will guide the use of the new stable coin. The UK Finance Minister Phillip Hammond takes a different stand that the financial regulators should decide the fate of Libra, not lawmakers.
How Libra will work
The social-media giant has an impressive user base of more than 1.5 billion people. The Globalcoin will help users to transfer coins to each other across the platform. is already partnering with a number of financial firms and online merchants in preparation for the launch. Of course, this will be preceded with an that aims to raise $1 billion in investment.
According to The Journal, the social network has courted Mastercard, Visa, and the payment processor First Data. It has also approached e-commerce firms and apps about accepting Globalcoin and investing in the project. The incentive is based on the zero card-processing fees for these merchants.
More importantly, plans to back its with dollar reserves in a bid to stabilize its value. Volatility has been the greatest undoing of and other , and looks to address that through fiat backup. Introducing a could also be a response to rising concerns about the privacy and safety of users. Of course, other promise user anonymity and security.
The company also plans to introduce a virtual checkout that coin holders could use to make purchases on other sites. It’s the same way you can use your credentials to log into other websites. Moreover, users will gain fractions of the coin by watching ads, engaging with other content, or shopping on the platform.
Funding Options for Globalcoin
Since the Globalcoin is typically a cryptos. So, ’s proposition may not attract as many investors as many would imagine. However, it could prove potentially interesting for mainstream financial institutions and consumers. users would be glad to have a coin that they can use to make purchases over the internet without worrying about erratic price movements., its value is pegged on a traditional . So, it can be traded easily across various exchanges. actually seeks to peg the value of its coin to a host of different foreign currencies other than USD. However, this brings issues when it comes to attracting investments. Cryptocurrency investors are often enticed by the wildly fluctuating value of
What does Facebook’s new cryptocurrency mean to Bitcoin?
’s will undoubtedly be a powerful force in developing countries, which is where the social media giant intends to market the product. The reason is that central banks in developing countries lack the integrity to maintain the value of their . More often, these currencies rapidly lose purchasing power, which is not a good thing for investors. Venezuela, for example, is experiencing hyperinflation worse than what Germany suffered after World War I.
By providing a reliable store of value for citizens in these developing countries, ’s will indirectly impart fiscal and monetary discipline on those nations. By extension, it will improve the lives of many people across the globe. However, many crypto experts believe that the Globalcoin will turn out to be Trojan horse that powers to mainstream adoption.
How will Bitcoin benefit?
While some schools of thought have taken a cynic approach, claiming that could detract from ’s value proposition, some believe that it could actually favor . Caitlin Long, Morgan Stanley’s former executive and blockchain proponent thinks that Globalcoin could bolster ’s mainstream adoption.
In an extensive interview on the possible effects of ’s on , Long explained that the new coin could help accelerate the adoption of . will tacitly educate its users about crypto assets. Through Globalcoin, users could interact expensively in the digital economy. But, when users get acclimated with the coin, they could turn back to for one simple reason: BTC is scarce and Globalcoin is not.
Backing her claim, Long pointed to the education efforts about Venezuela’s Petro . The oil-backed digital asset aimed to save the nation’s hyperinflating economy, but the results seemingly spiked the adoption of Bitcoin in Venezuela. The same trend could easily recur with ’s .
Luke Martin, a reputable analyst and industry commentator, also agrees with Long’s prediction. Martin recently reiterated that , being the industry pioneer, acts as an on-ramp to any that crops up. So, ’s foray into the ecosystem will eventually benefit .
Although Globalcoin is likely to enjoy widespread adoption owing to ’s enormous user base, it is not a venture immune to challenges. In the long run, it will drive the long-term value of and accelerates the adoption and acceptance of digital assets across the globe. Furthermore, the presumably centralized could be a “honeypot” for and governments.