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What does the new Facebook cryptocurrency mean? according to the news, Facebook will soon launch the Libra, a global cryptocurrency available to users of its suite of platforms (including Messenger and WhatsApp). Presumably, any merchant with an account on these platforms could trade in cryptocurrency with customers who also have accounts – for everything, such as online shopping and physical purchases such as grocery stores and restaurants. Facebook this week revealed its intention to announce the details on June 18 and confirmed that his cryptocurrency will be a "Stablecoin"The value of which will be linked to a basket of fiduciary currencies. Based on Facebook's statement and several anonymous comments made by people related to the project in interviews with L & # 39; informationHere are my six predictions.
- Facebook's cryptocurrency will be a powerful force in developing countries, where Facebook intends market the product.
Why? Because the central banks of developing countries are reputed for their lack of discipline in maintaining the value of their fiduciary currencies, which all too often lose their purchasing power. The best example among many is Venezuela, which is experiencing hyperinflation worse than that of Germany after the First World War. By providing citizens of developing countries access to a more reliable store of value than their government-guaranteed currencies, Facebook's cryptocurrency will indirectly exert fiscal and monetary discipline on developing countries, which will improve the lives of many people in the world.
- Facebook will pay interest to the holders of its cryptocurrency, which will eventually result in populist calls to repeal the subsidies granted by companies to banks located at the heart of the US banking system.
I am going to embarrbad and predict that Facebook will interest users of its cryptocurrency. Why? Because the badets guaranteeing cryptocurrency will generate interest income (especially if, according to some reports, this basket includes "low risk securities"). If Facebook does not share these interests with users, a group of critics will announce out loud the amount of money that Facebook and its partners pocket.
How much interest income is at stake? If Facebook reserves the entire balance in US dollars to the Federal Reserve via one of its banking partners, for example, it could win 2.35% without risk– It's $ 235 million for every $ 10 billion deposited in its cryptocurrency. These profits will quickly turn into a new hot potato for Facebook politically, if not shared with users.
But there is a secondary benefit: the hubbub that this question could create would reveal the extent of corporate welfare at the heart of the US banking system. The 2.35% figure is the real interest rate paid by the Fed to its member banks for interest on excess reserves (IOER). This year, it is estimated $ 36 billion social badistance business paid to US bankswhich is about half of the amount the US spends on its food stamp program. Just imagine how critics will spend a day on the ground shouting "The welfare of the company for Facebook" if Facebook and its partners simply pocket this amount.
It is true that other stable transmitters almost always put the float in storage rather than sharing it with their customers. However, Facebook's budget will probably be too large and visible to get away with it. It is therefore unlikely that the problem is underpinned. It's a good transition to the next point.
- Facebook's foundation will grow to attract great power in the global financial markets.
Facebook plans to hand over control of the governance of its project to a independent foundation, which she recently trained in Switzerland. This is a positive point: not only does this give Facebook a defense against antitrust allegations, but it also helps to reduce the degree of centralization of its cryptocurrency. This base is likely to become a huge power in the global capital markets relatively quickly, as it will do what central banks do, namely define the basket weights for the fiduciary currencies to which the stablecoin is indexed and manage the badets in order to guarantee it does not break. There are many powerful "baskets" in the financial markets and their power to transfer markets can be considerable – think of the committee that defines the components of the Dow Jones Industrial Average Index (DJIA) or index S & P 500, or the central banks that index their currencies on baskets (like the PBOC in China).
With this in mind, at first glance, it appeared to me that Facebook sells the right to participate in its network for $ 10 million each, since transaction processors ("minors") in the cryptocurrency markets are generally paid for their services rather than being forced to pay to play. But remember # 2: there is a big pot of interests to share between them, especially if they do not pay interest to users, and the volume of foreign exchange is at stake. No wonder Why dozens of banks will be potentially involved.
- Facebook will face regulatory uncertainty, which will shed light on many outdated financial regulations.
Is Facebook's cryptocurrency a security? If so, will users face the nonsense of needing a US brokerage account to buy a cup of coffee with? Will Facebook catch up with the regulators that small start-ups do not have – because of the tax data that the Facebook project will generate for governments? It's a good transition to the next prediction.
- Facebook's regulatory reporting program will open all sorts of interesting discussions.
We may be on the verge of knowing how much Facebook 2.3 billion users are real because users of their cryptocurrency must prove their identity and meet customer compliance requirements to your customer. & nbsp;L & # 39; information Facebook said: "plans to provide stricter forms of identity verification and fraud detection than most crypto-currencies."
But there is more. Discussions about data privacy and the power of Facebook's businesses are about to spread to the money. Take the popcorn!
This will open up all sorts of discussions about the scope of data privacy, financial confidentiality, reporting of badets abroad, tax compliance and reporting burden – and could potentially challenge the requirements. extraterritorial reporting requirements imposed by the US government on non-US companies. Governments around the world will view Facebook's cryptocurrency as a huge honeymoon on how users spend their money – with all the privacy and tax implications badociated with honeypot data, as each transaction would be traceable by governments. This would give some officials what they hoped for, namely the ability to track, monitor and badyze every dollar spent instead of piecing together fragmented reports (at present, banks file suspicious activity reports for transactions over $ 10,000). Here is an example in a statement made in May 2019 speech Sigal Mandelker, Under-Secretary for Terrorism and Financial Intelligence:
"When FinCEN badyzed millions of dollars in money transfer transactions suspected to be related to terrorism, it found that they were on average less than $ 600 each. & nbsp; At a time when a radicalized suicide bomber can tragically end the lives of hundreds of people for nothing but the price of a tape, a vest, and supplies, we can not afford to all money to flock to the terrorists. " (added emphasis)
In addition, these reporting requirements are about to grow substantially once the Financial Action Task Force has recommended that all financial transactions (including cryptocurrencies) integrate data on the beneficial owner in each transaction, both for the sender and the recipient.
As I explained in a previous Forbes.com article, I doubt that the data stack required by the US reporting requirements will survive a constitutional challenge. What interest if Facebook was at the center of such a challenge. Would he fight or cooperate?
- Facebook cryptocurrency will eventually become a Trojan horse for Bitcoin.
Here's my biggest prediction: Facebook's foray into cryptocurrency will benefit Bitcoin. It will take time, but Facebook will significantly accelerate the pace of information on cryptocurrency. And when that happens, more and more people are turning to Bitcoin for a simple reason: Bitcoin is rare, unlike Facebook's cryptocurrency. People will migrate over time to the most honest big book to store their hard-earned wealth – and it's not fiduciary money or derivatives, including Facebook's cryptocurrency.
This phenomenon actually occurred in Venezuela, as Nick Spanos, a member of Bitcoiner recently told me. When the Maduro regime introduced the unfortunate cryptocurrency, the government made concerted efforts to educate Venezuelans on cryptocurrencies. peak in the use of bitcoin by Venezuelans.
Facebook's incursion into cryptocurrency will likely be a beneficial detour on the way to wider adoption of bitcoin. Bring it on!
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What does the new Facebook cryptocurrency mean? According to reports, Facebook will soon launch Libra, a global cryptocurrency available to users of its suite of platforms (including Messenger and WhatsApp). Presumably, any merchant with an account on these platforms could trade in cryptocurrency with customers who also have accounts – for everything, such as online shopping and physical purchases such as grocery stores and restaurants. Facebook announced this week its intention to announce the details on June 18 and confirmed that its cryptocurrency would be a "stablecoin" whose value will be linked to a basket of fiduciary currencies. Based on Facebook's statement and several anonymous comments made by people related to the project in interviews with The Information, here are my six predictions.
- Facebook's cryptocurrency will be a powerful force in developing countries, where Facebook intends to market the product.
Why? Because the central banks of developing countries are reputed for their lack of discipline in maintaining the value of their fiduciary currencies, which all too often lose their purchasing power. The best example among many is Venezuela, which is experiencing hyperinflation worse than that of Germany after the First World War. By providing citizens of developing countries access to a more reliable store of value than their government-guaranteed currencies, Facebook's cryptocurrency will indirectly exert fiscal and monetary discipline on developing countries, which will improve the lives of many people in the world.
- Facebook will pay interest to the holders of its cryptocurrency, which will eventually result in populist calls to repeal the subsidies granted by companies to banks located at the heart of the US banking system.
I am going to embarrbad and predict that Facebook will interest users of its cryptocurrency. Why? Because badets that guarantee cryptocurrency will generate interest income (especially if, according to some reports, this basket includes "low-risk securities"). If Facebook does not share these interests with users, a group of critics will announce out loud the amount of money that Facebook and its partners pocket.
How much interest income is at stake? If Facebook reserves the entire balance in US dollars to the Federal Reserve via one of its partner banks, for example, it could earn 2.35% risk-free, or $ 235 million for $ 10 billion deposited in its crypto -change. These profits will quickly turn into a new hot potato for Facebook politically, if not shared with users.
But there is a secondary benefit: the hubbub that this question could create would reveal the extent of corporate welfare at the heart of the US banking system. The figure of 2.35% corresponds to the real interest rate paid by the Fed to its member banks for interest on excess reserves (IOER). This year, it is expected to rise to $ 36 billion in social badistance to companies paid to US banks, which equates to about half the amount the United States spends for its food stamp program. Just imagine how critics will spend a day on the ground shouting "The welfare of the company for Facebook" if Facebook and its partners simply pocket this amount.
It is true that other stable transmitters almost always put the float in storage rather than sharing it with their customers. However, Facebook's budget will probably be too large and visible to get away with it. It is therefore unlikely that the problem is underpinned. It's a good transition to the next point.
- Facebook's foundation will grow to attract great power in the global financial markets.
Facebook plans to hand over control of the governance of its project to an independent foundation recently created in Switzerland. This is a positive point: not only does this give Facebook a defense against antitrust allegations, but it also helps to reduce the degree of centralization of its cryptocurrency. This base is likely to become a huge power in the global capital markets relatively quickly, as it will do what central banks do, namely define the basket weights for the fiduciary currencies to which the stablecoin is indexed and manage the badets in order to guarantee it does not break. There are many powerful "baskets" in the financial markets and their power to transfer markets can be considerable – think of the committee that defines the components of the Dow Jones Industrial Average Index (DJIA), index S & P 500 or central banks. which link their currencies to baskets (like the PBOC in China).
At first glance, it seemed to me in the back that Facebook claims the right to participate in its network for 10 million dollars each, since in general, transaction processors ("minors") in the crypto markets are paid for their pay-to-play services. But remember # 2: there is a big pot of interests to share between them, especially if they do not pay interest to users, and the volume of foreign exchange is at stake. No wonder that dozens of banks are potentially involved.
- Facebook will face regulatory uncertainty, which will shed light on many outdated financial regulations.
Is Facebook's cryptocurrency a security? If so, will users face the nonsense of needing a US brokerage account to buy a cup of coffee with? Will Facebook catch up with the regulators that small start-ups do not have – because of the tax data that the Facebook project will generate for governments? It's a good transition to the next prediction.
- Facebook's regulatory reporting program will open all sorts of interesting discussions.
We may be on the verge of knowing how many 2.3 billion Facebook users are real because users of its cryptocurrency should prove their identity and meet your customer's compliance requirements. The history of information indicates Facebook "plans to provide forms of identity verification and fraud detection more stringent than most crypto-currencies".
But there is more. Discussions about data privacy and the power of Facebook's businesses are about to spread to the money. Take the popcorn!
This will open up all sorts of discussions about the scope of data privacy, financial confidentiality, reporting of badets abroad, tax compliance and reporting burden – and could potentially challenge the requirements. extraterritorial reporting requirements imposed by the US government on non-US companies. Governments around the world will view Facebook's cryptocurrency as a huge honeymoon on how users spend their money – with all the privacy and tax implications badociated with honeypot data, as each transaction would be traceable by governments. This would give some officials what they hoped for, namely the ability to track, monitor and badyze every dollar spent instead of piecing together fragmented reports (at present, banks file suspicious activity reports for transactions over $ 10,000). Here is an example in a statement made in a speech made in May 2019 by Sigal Mandelker, Under-Secretary for Terrorism and Financial Intelligence:
"When FinCEN badyzed millions of dollars in money transfer transactions suspected to be related to terrorism, it found that they were on average less than $ 600 each. At a time when a radicalized suicide bomber can tragically end the lives of hundreds of people, just for the price of a duct tape, a vest and supplies, we can not afford to all money to flock to the terrorists. " (added emphasis)
In addition, these reporting requirements are about to increase significantly once the Financial Action Task Force has recommended that all financial transactions (including cryptocurrencies) incorporate beneficial ownership data in each transaction. for both the sender and the addressee.
As I explained in a previous Forbes.com article, I doubt that the stack of data required by the US reporting requirements will withstand a constitutional challenge. What interest if Facebook was at the center of such a challenge. Would he fight or cooperate?
- Facebook cryptocurrency will eventually become a Trojan horse for Bitcoin.
Here's my biggest prediction: Facebook's foray into cryptocurrency will benefit Bitcoin. It will take time, but Facebook will significantly accelerate the pace of information on cryptocurrency. And when that happens, more and more people are turning to Bitcoin for a simple reason: Bitcoin is rare, unlike Facebook's cryptocurrency. People will migrate over time to the most honest big book to store their hard-earned wealth – and it's not fiduciary money or derivatives, including Facebook's cryptocurrency.
This phenomenon actually occurred in Venezuela, as Nick Spanos, a member of Bitcoiner recently told me. When the Maduro regime introduced the unfortunate petro-cryptocurrency, the government made concerted efforts to educate Venezuelans on cryptocurrencies – which translates to an increase in the number of bitcoins used by Venezuelans.
Facebook's incursion into cryptocurrency will likely be a beneficial detour on the way to wider adoption of bitcoin. Bring it on!
