Many great businesses have crumbled because they didn’t react to and provide for their customers’ changing behaviors or demands quick enough
The inevitable has happened. For years governments and conventional financial institutions have worried about Silicon Valley doing what it does best – disrupting the status quo. And Facebook did just that with the recent announcement of Libra, its digital currency, which will be launching as early as next year. Since the ambitious plan was unveiled, it has been met by an avalanche of skepticism from regulators around the world.
.@AOC: Currently Libra's governed by Facebook, Uber eBay, Spotify, Visa… Were they democratically elected?
Facebook’s Crypto Chief: No, Congresswoman.
AOC: So we're discussing a currency controlled by an undemocratically selected coalition of largely massive corporations. pic.twitter.com/ks5XbagGWg
— Public Citizen (@Public_Citizen) July 17, 2019
The UK’s markets regulator, the Financial Conduct Authority (FCA) has proposed a ban on financial instruments linked to digital cryptocurrencies, while Mark Carney, Bank of England Governor states that if Facebook’s currency is successful “it will have to be subject to the highest standard of regulation”.
Across the pond, Democratic members on the House Financial Services Committee are calling on the social media giant to halt its cryptocurrency plan.
“If products and services like these are left improperly regulated and without sufficient oversight, they could pose systemic risks that endanger the U.S. and global financial stability. These vulnerabilities could be exploited and obscured by bad actors, as other cryptocurrencies, exchanges, and wallets have been in the past,” states a letter by the lawmakers to Facebook CEO Mark Zuckerberg and his partners. “Investors and consumers transacting in Libra may be exposed to serious privacy and national security concerns, cybersecurity risks, and trading risks. Those using Facebook’s digital wallet — storing potentially trillions of dollars without depository insurance — also may become unique targets for hackers.”
Given Facebook’s history, this reaction feels warranted. Samuel Leach, FX, stock trader and director of Samuel and Co Trading says: “While Facebook has a terrific userbase and the right tools to make this happen, given its recent data protection and privacy issues it is inevitable that regulators, particularly in the EU, will be looking at this development very closely.
I’m heartened by the (largely) thoughtful dialogue from this week’s congressional hearings on @Libra_ . Committee members are supportive of blockchain and payments innovation in the U.S., but skeptical that Facebook is the right steward given the history of broken trust. 1/4
— Brad Garlinghouse (@bgarlinghouse) July 17, 2019
“Libra is one of the most well-integrated and user-friendly cryptocurrencies. If it succeeds, this will have a big effect on the cryptocurrency market. It is going to continue to gain attention, not only within the crypto industry but in mainstream media.”
Although banks and governments have reacted to Libra with skepticism, this project has legs. “Most firms need to see other well-known brands using cryptocurrencies before they take that leap of faith,” says Sukhi Jutla, IBM blockchain developer and co-founder of MarketOrders, a B2B marketplace that uses blockchain tech in the jewelry industry. “In this case, the fact that Visa, Mastercard, and PayPal have confirmed they will be accepting Libra payments is a giant vote of confidence for mainstream adoption.”
Other important reasons for the optimism is that Libra will be able to handle large transaction volumes – and it would need to if Facebook’s 2.4 billion users adopt the digital currency to shop and transfer money.
The big question is…
If this takes off, what does it mean for businesses and consumers?
It would revolutionize consumer behavior, as Facebook plans to release Libra through its Messenger, WhatsApp and Instagram platforms. The currency can then be transacted not only within Facebook’s apps but also with other partners on the project, including Spotify and Uber.
Governed by The Libra Association, an independent, not-for-profit organization, Libra has the opportunity to reduce barriers for the unbanked and underbanked, using technology to increase financial inclusion across the globe. More from @USATODAY: https://t.co/KRbUiQrVFi.
— Libra (@Libra_) July 16, 2019
The more mainstream cryptocurrency becomes, the sooner brands and franchise companies will need to adapt to survive. “Companies only survive when they can keep up with changing consumer trends and demands,” explains Jutla. “With more customers wanting to use cryptocurrencies – because they either prefer it or see it as a better way to transact – brands will have no other choice but to give consumers what they want or risk losing business.
“Many great businesses have crumbled because they didn’t react to and provide for their customers’ changing behaviors or demands quick enough. Companies really should be embracing these changes and not risk getting left behind or joining the party when it’s too late.”
As the popularity and use of cryptocurrency grows, it will change the landscape of business forever. For example, Leach points at smart contracts that are made through blockchain as a way to protect against fraud. “One of the biggest breakthroughs of cryptocurrency is blockchain technology,” he says. “Blockchain smart contracts work like this: once both parties agree to the set of conditions, the mutually agreed upon cryptocurrency payment will be transferred. Once a smart contract has been submitted, it cannot be altered, and copies will be given across all the nodes of the blockchain. Since blockchain is both decentralized and immutable, it protects those who would seek to cheat.”
Smart Contracts are revolutionizing the way we do business for the better. If you have ever wondered what 'Smart Contracts' really are, then you need to watch this.