Facebook announced this morning that it is getting into the digital currency game, launching a subsidiary called Calibra that will offer a digital wallet product to facilitate transactions with the new Libra currency. Along with the announcement is a white paper outlining the effort, as well as a series of big-name partners, in a move that could signal a step toward more widespread adoption of cryptocurrency by both users and merchants. 

There are already plenty of other digital coins available, including the most well-known, Bitcoin. The thing is, as of yet, no one uses any of them at a large scale, including Bitcoin.

It appears that Facebook won't directly control the currency, Instead, the company is leaving that to a newly created governing body called the Libra Association, made up of other companies that have partnered in the initiative. Visa,  PayPal, Uber, Stripe, MasterCard, and eBay have all signed on as founding members of the separate Libra Association that will control and govern the currency.

Here's what we know, and why it matters to users, to Facebook, and to your business.

Digital currencies in general.

First, there's no doubt it could be good for the overall adoption of cryptocurrencies as a viable alternative to dollars, since it creates a stable currency with a built-in potential user base. Right now, existing digital coins require what can be, for most users, an overly complicated process for acquiring and using them in everyday transactions. 

In addition, unlike Bitcoin, Facebook's currency won't be completely decentralized. Instead, it will be controlled through a series of nodes on a network set up through the Libra Association. It will also be tied to and backed by a collection of low-volatility assets to ensure that prices remain relatively stable, compared with the extreme fluctuations seen in other cryptocurrencies.

Digital currencies haven't gained widespread acceptance largely because they aren't well understood, and are associated by most people with gamers and shady characters trading on the dark web. But having these big names behind a digital currency like Libra could be what it takes for it to finally become something that people actually use.

According to Matt Baer, founder and CEO of KeyoCoin, if Facebook's move "pulls millions of people into the cryptoverse for the first time, and settles some nerves around digital currencies in the process, it could be a step toward the mass adoption that the industry is so desperately seeking. Whatever you might think about the social networking platform, there's no doubt it's one of only a handful of companies with the ability to change certain aspects of consumer behavior around the world almost overnight."

Users who lack traditional financial products.

Facebook's announcement is clear that it sees this as filling a need, especially in developing economies where stable currencies don't exist, or access to digital payments isn't common. Facebook notes that "almost half of the adults in the world don't have an active bank account and those numbers are worse in developing countries and even worse for women."

If you're a user in that situation, then this can be a simple way to send payments between family, friends, or even to purchase goods through Facebook's collection of apps. In fact, that's the most obvious goal--to provide a seamless way for Facebook's users to conduct transactions from within Facebook's apps. 

Whether you're willing to give Facebook access to another aspect of your life is a different issue altogether. Arlo Gilbert, CEO and co-founder of Privacy Monitor, says that "Facebook has a terrible history of not only misusing and misleading consumer regarding their privacy but with the recent revelation that these privacy decisions have come from Mark Zuckerberg himself, I would be terrified to allow Facebook to have anything to do with my money until they prove themselves to be good stewards of less sensitive information."

Facebook's overall goal.

Every Facebook initiative should be viewed through the lens that the company's ultimate goal is twofold--getting more people to spend more time on the site, and gathering as much information about them as it can. Looked at through that perspective, a digital currency makes sense but could be a huge concern for user privacy. 

At the same time, whether the payment space actually adds revenue to Facebook's bottom line may not matter if it keeps people more closely tethered to its overall ecosystem.

However, clearly these big names aren't all that worried about Facebook's current problems when they weigh them against access to its 2.4 billion monthly users. In reality, Facebook needed a pool of big-name companies to join it if it stood any chance of passing regulatory concerns and privacy criticism.

A double-edged sword for businesses.

Will you want to accept Libra for your business? As with everything Facebook, it's really a double-edged sword. No one wants to give up access to the potentially vast user-base that comes with Facebook, but at the same time, you'll have to decide if you're willing to cede another part of your business to a company that hasn't always shown that it can be trusted.

Facebook appears to be making a move to transforming its focus from a primarily ad-focused platform, into the e-commerce and financial marketplace for the world. Like the big-name brands that have already signed on, the prospect of making it easier to sell products online to the world through Facebook, using a built-in digital currency, is likely to be far too great an opportunity for many small businesses to resist. 

Published on: Jun 18, 2019
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