Cryptocurrencies, a virtual money that is digitally created and stored, have in the bitcoin its most popular representative. With an approximate value of 182,469.58 Mexican pesos, investing in them is very attractive; however, given that they are not an official currency in any country, there is no authority that can respond to their oscillations in value, and there have been cases in which cryptocurrencies have been involved in illegal operations such as fraud or money laundering.
Currently, those operations completed with cryptocurrencies are irrevocable. Hence there is no way for users to file complaints in case they suspect that they have been the victims of fraud.
According to Criptómetro Mx18, the first study of digital currencies in our country, Mexico is the second nation in Latin America, after Brazil, with the largest number of buyers of digital currencies. This is due to the fact that they are considered an excellent tool to speed up financial inclusion, especially concerning those individuals that are marginalized from traditional financial services.
Knowing full well the risks of transactions with such currencies, Mexico began to develop a law named FINTECH which would regulate, among other things, the purchase and sale of virtual assets (cryptocurrencies). This law was passed during the first trimester of 2018 and set a precedent for other countries to begin looking into ways of regulating non-traditional financial services.
However, the hand to be played is about to change since Facebook announced its entry into the cryptocurrency market with Libra, revealing thus an important effort in going beyond social networks and reaching into the universe of global monetary transactions.
On the other hand, they have also created Calibra, a company that would allow its users to have digital wallets to save, transfer, and use Libras. If they manage to include all Facebook users, which, according to statistics obtained by a digital marketing and consulting company Zephoria Inc, are 2.38 thousand million monthly users, this cryptocurrency could change the landscape of the global economy.
Many experts in economy believe that the incorporation of this new investment and e-commerce platform will be received with a certain degree of skepticism by regular Facebook users, since the general public still knows very little about cryptocurrencies.
The launch of the cryptocurrency is planned for the first semester of 2020, possibly generating a gap between the banks of the world. On the one hand, it is speculated that certain banks will conform to adjusting their transactions to the Libra and other banks will perceive the risks associated with other cryptocurrencies similar to the bitcoin.
Since the announcement of Libra, approximately 63 global banks have begun to work on technologies to associate cryptocurrencies to their daily transactions and some experts believe that the fact that Facebook is behind this launch will drive people to being more open about investing in this new form of currency.
Mark Zuckerberg said the following during the Aspen Ideas Festival: “To build a financial system is not something that a single company can accomplish. We are helping to build this. The Libra Association is an independent organization, and we will have a vote as members in the association. By the time it launches, we hope to have close to 100 co-founding companies.”
It is important to note that Facebook is not the only partner of Libra, for companies such as Mastercard, Visa, Spotify, PayPal, eBay, Uber, and MercadoLibre have also joined in their efforts to launch the new cryptocurrency, contemplating a time in which the transactions between the platforms and the corresponding banks may be established from their own servers.
What does Facebook get out of this?
Trusting in the large volume of daily transactions that will take place with these cryptocurrencies, it is thought that Facebook will charge an “insignificant” fee for each transaction. Also, the social network will be able to eventually offer additional financial services to its users via Calibra. Yet Facebook’s biggest accomplishment, once again, is to retain users in its platforms for longer, so as to have them receive more ads, which, at the end of the day, push the company’s revenue.
What’s in it for the other partners?
Partners such as Mastercard, Visa, Spotify, PayPal, eBay, Uber, and MercadoLibre invested approximately 10 million dollars each for the privilege of managing nodules in the web of Libra, and even if saying that they will invest in “the competition” does sound strange, they will have access to the data of how, when, and where people spend money.
The biggest worry for users of this new cryptocurrency is how the protection of personal information will be guaranteed, but when announcing the creation of Libra and Calibra, Facebook reiterated that it will maintain financial and social information strictly separate, assuring that users will not be identified with ads based on their consumption habits.
Something that merits emphasizing is that Libra apparently will not necessarily be a cryptocurrency and, as such, will not use blockchain technology – a technology that manages data as a collection of transaction blocks. The equivalent to blockchain in Libra will be a single information structure that will register transactions in real time. This implementation will simplify the process for applications that require access to Libra’s blockchain, giving them access to any information when requested, so as to verify the integrity of the data.
Therefore, we only need to wait about a year to monitor the economic activity of the new cryptocurrency in order to make the necessary decisions and begin completing transactions with it, or not.
