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There are lessons to be learnt as the social media network launches its own cryptocurrency
We have known for some time that somewhere in the depths of Facebook HQ they were beavering away designing a cryptocurrency. And in June, the company unveiled its crypto plans in a white paper.
The new digital currency is called Libra, and is designed to be a low-volatility currency that will let its users buy things or send money to people with very low fees. It will be backed by reserves managed by an independent organisation, called the Libra Association, made up of several leading tech firms and non-profits. This body gives the token real-world value and oversees the governance of the blockchain technology that powers it.
Facebook’s launch into cryptocurrencies tells us two things.
Firstly, the role of traditional banks will decline at a quicker rate than many had previously predicted. Facebook’s Libra cryptocurrency will be able to transact across traditional payment rails. It has partnered with PayPal, Mastercard, Visa and Stripe, among others, to fuel merchant acceptance of the digital currency.
If you have cryptocurrency on these payment methods, the purpose of and use for traditional banks will surely shrink.
Cryptocurrencies and fintech or financial technology solutions are already taking business away from banks. They are filling a gap left by the traditional way of doing things as the world speeds up and becomes increasingly globalised and digitalised. The jump into cryptocurrencies — which are the future of money — by Facebook, which already has 2.7 billion users, can really only be seen as another nail in the coffin for banks.
Secondly, tech giants entering the cryptocurrency sector indicates that digital money, as a concept, is fully mainstream and inevitably the way the world is going. This is something we have been arguing for a long time now — despite protestations from financial traditionalists.
Where Facebook leads, others will inevitably follow, and this will quicken the pace of mass adoption of cryptocurrencies. The already burgeoning sector is becoming unstoppable as institutional investors increasingly step off the sidelines and jump into the sector.
They understand, as do retail investors, that in our ever-more digitalised, globalised world borderless, digital currencies are the future of money, and they want and need to be part of it.
The astonishing and quickening pace of the digitalisation of the global economy is going to be fuelled, and likely led, by cryptocurrencies and the revolutionary technology, Blockchain, on which they run.
This is a major development in the crypto-verse and it is surely just the beginning. This is set to revolutionise how people access, manage and use money across the world, and it will positively disturb the wider banking sector.
Banking as we have known it until now is coming to an end.
The writer is founder and CEO of deVere Group
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