This article was first published on Silicon Republiccryptocurrency – Silicon Republic
On 18 June, Facebook officially launched its Libra cryptocurrency project, which aims to leverage blockchain technologies to create a new stable cryptocurrency backed by a basket of fiat currencies.
Facebook says its aim is to enable accessible and affordable digital payments for billions of people, including unbanked and underbanked people across the world. It aims to make sending payments as easy as sending a message across its digital platforms for its 2.7bn global users.
The Libra vision is a bold and ambitious one, yet Facebook’s decision to introduce Libra as a cryptocurrency rather than just a new payment system sets up a series of massively complex challenges.
Below are three of the most important issues Facebook will have to address before Libra becomes a reality.
1. How to bring governments and regulators on board
A cryptocurrency being used by 2.7bn people across the globe would be a threat to national sovereignty and disrupt their ability to coin money. Some countries have outright banned bitcoin and other cryptocurrencies due to similar threats. The US, France and Russia have now all expressed concerns regarding the threat that Libra would represent.
In addition, the fiat-currency-backed nature of Libra means that it will have to collaborate with regulators either directly or indirectly (through regulated and licensed financial institutions). Thus, support from regulators is paramount. Lack of regulatory support could significantly reduce the capabilities of Libra or make it illegal.
2. How to rebuild consumer trust around data privacy
Though cryptocurrency itself is characterised by anonymity, the digital platforms that consumers use to make payments will be based on WhatsApp, Instagram and Facebook. The Cambridge Analytica scandal exposed egregious missteps by Facebook, and users haven’t yet forgotten that breach of trust.
Libra’s documentation indicates that Facebook has strengthened its data privacy protection ...
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