Facebook goes Crypto – what does it mean for you?

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Facebook goes Crypto – what does it mean for you?

This week Facebook announced a plan to lead the rollout of a new Crypto currency Libra. Whilst all the initial reports focused on Facebook, it is in fact a consortium based in Switzerland that includes VISA, Mastercard, Uber, EBay, PayPal, Vodaphone, microlending non-profit Kiva, Stripe, Spotify and more. The intention is to have 100 foundation members by the time it launches. With all those heavy hitters behind it, you’d be brave to bet against it.  

This is potentially huge, so what does it mean for you?

1. Disruption in financial services.

Remember when every time you used your credit card in a taxi they charge you a 10% card fee?

Unadulterated piracy. Then Uber came along.

You know those international transaction fees you get hit with every time you shop online? Libra would eliminate those. Buying something from a US store would be no different to buying something locally because there’s no need to change currencies. Sure, you need to convert your AUD into Libra to begin with, but once it’s there, you can transact all around the world without banks and credit card companies clipping the ticket every time you so much as wriggle.

2. Crypto goes mainstream

We’ve all heard the stories of people buying Bitcoin and it’s cousins and making or losing squillions. But for the average person, thus far crypto currencies have had no impact. You can’t buy your lunch with them or pay your electricity bill.

But Libra will change all that. Facebook plans to make transferring money simple via its Messenger and WhatsApp platforms, and the source code is to be open so other developers can build services around it. No doubt that is why Stripe is in there – they supply merchant facilities to shops now. It’s not likely to be at all difficult for them to update their terminals to allow you to pay in Libra.

A key benefit of crypto-currencies is that they are independent of governments. They’ve been especially popular in places where governments haven’t always bathed themselves in glory when it comes to economic management – South America, Africa, and parts of Asia. And with the likes of Trump’s trade war with China potentially causing more disruption and volatility, the opportunity for many to store their wealth in something independent and impartial will likely hold enormous appeal.

3. The Crypto to end all Crypto’s?

Libra would seem to have taken all the best bits learned from existing cryptos, and then filled in the holes that prevented them from going mainstream. Given this, will the world still need all the other crypto-currencies out there?

4. National sovereignty and tax revenue

Goods and services cost different amounts in different countries due to differing raw materials costs, wages, energy, etc. So local currencies will always be needed. However, imagine a world 10 years from now where 50% of all global commerce occurs using Libra, with no country’s government having any control. No longer would countries be able to fund wars by printing money. Stimulating the economy through changes in official interest rates would become less effective. And quantitative easing, where central banks pump money into the economy, would simply devalue the local currency against the global crypto-currency, thereby encouraging ever more people towards its adoption.  

There has been considerable commentary around the impact on tax revenue. Currently, crypto-currencies are taxed like shares – they’re considered an investment. If Libra succeeds in becoming the preferred way for you to pay for your new Nikes, clearly things will need to change.

If the consortium members can get this project off the ground, it has the potential to be one of the defining achievements of the 21st century.
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