Facebook’s Libra crypto-coin is stirring questions from all corners of the payment market with many analysts trying to understand the motive behind it.
Tim Sloane of Mercator Advisory Group who monitors the development of digital currencies feels cryptocurrency is not an appropriate space for Facebook to explore. According to him, it would make more sense if the world-known social media platform introduced a private currency that depends on already existing payment avenues— much like WeChatPay did.
“It is hard to comprehend how cryptocurrency will fit into this context.” Says Sloane.
“Why crypto, and why Facebook?” asks the analyst.
The digital currency expert feels that Facebook’s approach to the project, to involve payment giants like Mastercard, PayPal, Stripe, Visa, and eight other firms, could prove to be a minefield instead of an asset.
Though the giant social-media firm boasts of a global user base of 2.4 billion people, the last few months have threatened to taint its reputation for its debatable user privacy practices. And Sloane feels that “the firm also has an exaggerated level of scrutiny that worsens the regulatory risk for its users.”
The Libra group needs to expound more on how its currency will operate when it rolls out in 2020.
Libra, which Facebook calls a stablecoin, is linked to fiat currencies to make it a suitable crypto for ecommerce and physical retail. It should be remembered that adoption rates (among merchants) for Crypto like Bitcoin have remained low due to the exaggerated fluctuations in its value.
But Sloane is still struggling to understand some points, and raising questions like;
- Will each partner operate an exchange?
- What will the revenue model look like?
- How do they plan to manage links to regulatory sectors in different countries?
- How will the associated companies take “know-your-customer & anti-money-laundering” measures? and
- How will Libra exchange be safe from fraud and theft?
Sloane is particularly worried about exchanges because, according to, “exchanges are a leading source of fraudulent activity in all digital currencies.”
Libra’s role in the market, while from the first glance would seem like a gold mine, it could turn into a minefield that may do more harm than good to its stakeholders and would-be beneficiaries.
Sloane feels launching this cryptocurrency in many countries worldwide would raise implementation costs to sky-high levels.
Despite all this criticism, Sloane still agrees with what’s clear so far concerning Project Libra. Number one, he consents with the fact that the crypto would be a stable coin. And two; its management by a group of payment giants is a move towards the right direction.
Hopefully, Project Libra’s white paper will help answer Sloane’s (as well as other critics) questions concerning Facebook’s new crypto set to roll out next year.
Author Bio: Payment industry expert Taylor Cole is a passionate merchant account expert who understands the complicated world of accepting credit and debit cards at your business. His understanding of payzone merchant services has helped thousands of business owners save money and time.