You cannot overstate the excitement and furor surrounding the proposed Facebook cryptocurrency, Libra. Indeed, this is different because of the sheer size of Facebook’s customer base and its marketing reach. The Libra whitepaper has just recently debuted but projections are already pretty high.
Bitcoin has done immensely well to get to where it is today, regardless of all the volatility along the way. That said, Bitcoin has not been able to even remotely pose a threat to the financial system as it is. Part of that is because of its scarce nature and also lack of regulatory and mainstream recognition. There is change, but the progress is slow.
Libra coin has the customer base through WhatsApp and the institutional might behind it to pose a significant threat. Accordingly, it can be the medium through which cryptocurrency comes out of the shadows and gets meaningful mainstream adoption.
The Chinese Market
China has a unique digital market as it is mostly homegrown. This is because the country’s government has successfully walled off companies like Facebook. The reason for this is that the communist government views the likes of Facebook as a threat to sovereignty and stability.
As such, local companies like Weibo dominate the scene. This leash means the government can monitor the kind of speech permissible in the online space. Similarly, payment apps like WeChat are locally based and thrive because of the unique market.
The blockchain is a game changer because of its immutability. This is because, unlike centralized systems that rely on established servers, blockchain transactions rely on independent servers called nodes. These nodes are independent and don’t require centralized approval to complete transactions.
Why China Sees It as A Threat
The immutability of blockchain makes it not subject to any kind of centralized censorship. This means that even though China has a digital wall on Facebook, Libra can still cause disruption in China. As such, there is disquiet about the impact of this coin with Facebook’s marketing prowess.
Even the French Minister of Finance, Bruno Le Maire has sought assurances that Libra will not be a direct threat to sovereign currencies. Indeed, the Libra coin could even replace the SWIFT standard that underwrites cross border bank money transfer. This is something a professor at Beijing University of Aeronautics and Astronautics, CAI Weide, thinks is possible:
“Libra has a bigger impact on the world than JPM Coin (the digital coin created by JP Morgan) as Facebook has an incomparable user base of at least 2 billion people from more than 100 countries and regions. There is no doubt Libra will replace SWIFT and change the international financial order,”
This is why certain Chinese entities are looking at the possibility of developing their own tokens to stem this tide. An example is the Chinese platform Tencent Q Coin. If Tencent platform develops this token with the dedication and resources Facebook has put into Libra, it could pose a necessary challenge.
Q-Coin is a virtual currency that users can leverage to purchase services from Tencent. That said, Tencent has not made it clear how it can become a stable coin like Libra. With the entrance of Facebook into this market, Chinese companies will have the incentive to ramp up development of native tokens.
The intellectual property and tech battles between the USA and China went a notch higher with the recent American ban on Huawei. Accordingly, these two countries will definitely square up on all fronts possible. Cryptocurrency did seem like a very unlikely front until Facebook jumped into the mix. It will be interesting to note what China has up its sleeve as a counter-measure.