Facebook’s stablecoin, Libra, is gaining popularity across the crypto space. The recent recognition by Fitch, a notable credit rating agency, is perhaps the most significant acknowledgment the cryptocurrency has achieved since its launch.
In a recent report, Fitch supported the Libra project, mainly because it is backed by fiat currency. The reported stated that Libra is advantageous over other virtual currencies since it supported by a reserve of fiat currency managed by a reserve fund. The size of the reserve fund depends on the volume of transactions, unlike in other digital currencies where it relies on an arbitrary supply limit or random algorithms.
Many believe that the Fitch report referred to Bitcoin when it mentioned the arbitrary supply limit. This stance will undoubtedly be unpopular among Bitcoin enthusiast, as its limited supply is one of its fundamental ideologies. Fitch justified this opinion by saying that the Libra token will benefit significantly because it has backing from fiat currency. The report further stated that Libra’s price stability increases its suitability to become a medium of exchange as well as a store of value.
Fitch is confident in the success of Libra. The company believes that Libra has a more significant potential than Bitcoin, as it has numerous real-life use cases.
Libra’s Target Population
Despite the many praises heaped on the Libra token, some people are still skeptical about the project. Joe Kerken from CNBC recently stated that Libra is not a virtual currency. However, the Libra Association is adequately prepared for such criticism. In the Fitch report, Facebook justifies the project by saying that it targets the population that is either underserved or entirely unbanked. The association intends to use Libra to ensure that these people access a reliable and affordable solution for transacting their finances.
One of the prominent personalities that are supportive of Libra’s project mission is Mark Carney, the governor of the Bank of England. Facebook is also working hard to ensure that the token is with all the legal requirements set by government authorities.
Impact Of Libra On Bitcoin
The growing interest in digital currencies such as Libra has had a positive effect on the value of Bitcoin. If other leading tech companies follow the precedent set by Facebook, it is difficult to tell the fate of Bitcoin, which has many limited features in comparison. Going by the impact of Facebook's Libra, it is likely that Bitcoin will experience a bullish run.