Global Giants Visa, Mastercard and Paypal Might Come to Regret Backing Facebook’s Libra Coin
Facebook's recently confirmed cryptocurrency project, known as Libra, is advancing slowly but surely towards the token launch. After many months of speculation and rumors, the company's confirmation in regards to the release of its cryptocurrency brought an entirely new wave of speculation and guesses.
Interestingly enough, some of the largest payment processors in the industry, including PayPal, Visa, Mastercard, and others — decided to officially support Facebook's coin. However, according to James Faucette, an analyst from Morgan Stanley, this might end up being the wrong choice for the companies.
According to Faucette, the choice to back Libra may have actually boosted one of the greatest risks that these firms will face — much tougher regulation. Faucette called it a ‘heavy burden,' which will increase the regulatory scrutiny. The situation in regards to regulations is already far from perfect, and this choice might actually make things worse, in the long run.
The analyst said that it is not difficult to imagine that Libra, backed by numerous respected companies, and created by one of the most successful business in the world, might end up becoming a global, free-floating currency. It might become a currency that cannot be controlled by central banks, governments, or anyone else, for that matter. If this happens, regulators, bankers, lawmakers, and everyone else of influence is likely to oppose it.
However, the impact on the coin's early supporters, such as Visa, Mastercard, and others would be quite big, as well. Not only regulatory but also political. Faucette believes that the technology risk is not something that deserves worrying about it, however.
But, if transactions cost ends up dropping, these companies will be had to dislodge as industry leaders. At least, unless a regulatory and political opposition arises. While clearly concerned about such turn of events, Faucette is still quite bullish of these companies. He believes that Libra still has a long way to go before becoming a threat. Furthermore, he also supports the companies' decisions to leave the Libra group if the situation turns for the worse.
The Future of Libra still Remains Uncertain
For now, Facebook itself has quite a few things still left to do, such as the House and Senate hearings on its digital coin, which are scheduled for mid-July. The hearings will not only be significant for Facebook, but also for other firms, such as Visa, PayPal, Mastercard, and even Stripe, and others. However, in Facebook's case — the hearings will be critical, as this will be a single chance for the company to set the tone for how Libra can benefit consumers and protect their privacy at the same time.
This will undoubtedly be one of Facebook's greatest challenges, particularly as it is unlikely that lawmakers will be friendly towards the idea of this coin. Given Facebook's previous problems with user privacy, as well as the unfriendly stance towards digital currencies themselves, Facebook will certainly have its hands full, even with those who do support cryptocurrencies.