Facebook’s efforts to participate in the cryptocurrency market are making the digital currency industry very hot.
Bitcoin speculators say the tech giant’s participation Cryptocurrency market will be the stamp of approval to legitimize this space, make it easier to buy and sell other digital assets and push other large financial institutions out of prudent wait.
Spencer Bogart, partner of San Francisco-based Blockchain Capital investment firm, said, “Facebook’s efforts to enter the cryptocurrency space have the potential to become one of the most important external catalysts in the world. the use of bitcoin and cryptocurrencies in technology history. ”
According to several news sources including Bloomberg and the Wall Street Journal, the company has built its own digital currency for users to transact and spend via Facebook Messenger and WhatsApp. Facebook shares also soared more than 3% on June 17 ahead of the expected announcement.
The social network hired former PayPal director, David Marcus, to start exploring opportunities with blockchain, the technology behind bitcoin and other cryptocurrencies. According to information on LinkedIn, there are currently more than 100 people working on the project, and Facebook is still expanding the team. The Information reports that Facebook is also planning for ATM-like machines, where users can buy the currency and company employees will be able to get paid in the form of new money.
Lower the barrier
The entry of Facebook into the virtual currency market will create an easier entry point for ordinary people just starting to buy cryptocurrencies.
Currently, bitcoin and other virtual currencies can be purchased on exchanges like Coinbase or Gemini or through a number of consumer finance applications such as Square Cash and Robinhood. One of the biggest differences is the conversion from dollars, or another global currency, to digital assets. But now, once someone wants to get involved in the world of digital assets, they will have a relatively less hassle-free way of moving from an asset like Facebook, to another. , like bitcoin, Mr. Spencer Bogart said.
“With the popularity of Facebook, the seriousness of their efforts and the size of the partners they are working with, they have a significant opportunity to bring much of the world into digital assets.” Mr. Bogart told CNBC.
Barry Silbert, an early bitcoin advocate and founder and CEO of Digital Currency Group, said the launch of the Facebook cryptocurrency “will go down in history as a catalyst for asset promotion. digital (including bitcoin) to global consumer acceptance. ” And this event will be remembered as “an important and breakthrough event like the launch of Netscape browser”.
Legalization of cryptocurrencies
Bitcoin itself was conceived as a way to overcome traditional financial rails. Bitcoin first sparked an international sensation after the Tokyo Mt. Gox went through a series of hacks, impacting the consequences of freezing out of the U.S. banking system because of regulatory issues, before closing and filing for bankruptcy protection in 2013. Trading on the dark web Silk Road used bitcoin to facilitate purchases of guns, drugs and other illegal goods, before being shut down in 2015. Bitcoin was known as the Currency is chosen by criminals, and some people still have this thought when they suspect the use of virtual currencies in modern financial institutions.
“People who use bitcoin and cryptocurrencies are soon to be considered anarchists – many have a tendency to oppose the government, have a view against the traditional social, political, and economic principles of society, against banking institutions – that’s why big financial institutions are wary of investing and supporting cryptocurrencies. When a large list of players who are big institutions come along, it will provide more legitimacy for the industry. ”
“The fact that Facebook and its partners even want to build a cryptocurrency will legitimize the idea of a decentralized money / payment system.”
The first and most famous digital currency sparked retail investors last year and put it into mainstream finance. Bitcoin hit a high of nearly $ 20,000 at the end of 2017. Michael Moro, CEO of Genesis Global Trading, said the concept of cryptocurrency became more and more normalized as the number of trading groups grew. Investors have mostly gone beyond the mental limits and see bitcoin as less esoteric and less strange, he said.
“I think Facebook’s launch of their own currency will make digital money more familiar to everyone,” Moro told CNBC in a phone interview.
Another question for both bitcoin investors and skeptics is about how and where virtual currency is used in the mainstream system. Bitcoin was founded as a peer-to-peer payment method, but it was largely used as a “digital gold” to store value. In that sense, Moro said Facebook and bitcoin cryptocurrencies would not directly compete with each other for “serving two different purposes”.
“People always question how formal adoption and adoption of such things can happen. Having a retail platform like Facebook will certainly help that, boosting the increase for the cashless society in general, ”Mr. Moro said.
Nicholas Colas, co-founder of research DataTrek, also said the move would legalize bitcoin. There are thousands of companies that are not part of Facebook’s Libra project.
“What technology will they use? Bitcoin is an answer, ”Colas said. “The fact that Facebook and its partners even want to build a cryptocurrency will legitimize the idea of a decentralized monetary / payment system.”
Others see this move as a motivation for financial institutions to build the rails needed to support the adoption of cryptocurrencies. Fidelity was one of the first to join by providing supervision and execution of transactions on multiple exchanges to investors such as hedge funds and family offices, with a new company called Fidelity Digital Asset Services.
“With Facebook and its partners making a concerted effort to participate in the cryptocurrency space, these financial institutions and payment providers cannot continue to wait, they need to prioritize building. building support infrastructure now, ”said Mr. Bogart.
Part of the risk in cryptocurrency investing is how to prevent the risk of hacking. Experts say this concern has largely left organizations hesitant to embrace these digital assets. The Facebook virtual currency effort could be a “catalyst” for building infrastructure such as wallets, custody and compliance agreements between financial institutions and major payment providers, Bogart said.
Chau Tran-Vi / CNBC
* Source: Investment bridge