Facebook’s Libra: What Investors Need to Know
In 2020, Facebook’s Libra will be launched.
So far, Facebook, Mastercard, Lyft, Uber, and Spotify are among the many member companies that are taking part in the project. PayPal was on board, too, but withdrew support without citing any specific reason.
However, they did note, “We remain supportive of Libra’s aspirations and look forward to continued dialogue on ways to work together in the future,” the statement continues. “Facebook has been a longstanding and valued strategic partner to PayPal, and we will continue to partner with and support Facebook in various capacities.”
Though, according to the Financial Times, PayPal began to distance itself from the project thanks to increased regulatory scrutiny, as highlighted by The Verge. In addition, the Times did report that “at least one concern for PayPal has been the lack of attention Facebook executives have paid to Libra’s considerable backlash.”
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The Libra Blockchain is Different
It’s important to know Libra does diverge from traditional blockchains.
Unlike a traditional decentralized blockchain, Libra is not decentralized. That’s because Libra will only be run from the servers of the Libra Association’s current members. Facebook as also noted that Libra cannot be full decentralized if it’s going to create a “global financial infrastructure,” as highlighted by Forbes.
In addition, Libra is a “stable coin.”
So, the value of Libra unite in circulation will be tied to the assets of various currencies stored by the Libra Association, as noted by Forbes. At the moment, Libra will be back by the U.S. dollar (50%), the Euro (18%), the Japanese Yen (14%), the British Pound (11%), and the Singapore dollar (7%).
There’s also plenty of criticism from world leaders.
The EU has already launched an investigation into Libra on antitrust issues, for example.
According to Bloomberg, the EU is “currently investigating potential anti-competitive behavior” by the Libra Association. The report describes the document as a questionnaire suggesting the commission is concerned that Facebook’s planned digital payment system could unfairly lock out competitors.”
In France, leaders are saying they can’t “authorize the development of Libra on European soil,” as quoted by Forbes. Even other world leaders argue it could threaten the financial stability of nations, which Facebook does refute.
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