Why Libra is the most ambitious crypto effort we've seen to date (FB)

Facebook has laid to rest months of speculation by unveiling details of its cryptocurrency, Libra an ambitious plan to transform and potentially upend the financial services industry, per Business Insider.

Libra Ecosystem Business Insider Intelligence

The crypto is expected to launch in the first half of 2020 and will be governed by the Libra Association, a nonprofit group comprised of 28 members, including financial institutions (FIs), venture capital (VC) firms, and e-commerce platforms.

Here's what it means: Libra is the most ambitious and aggressive crypto effort we've seen to date.

Facebook's efforts to transform financial services have attracted huge backers. In addition to payments giants like Mastercard and Visa, Facebook's signed on eBay, Spotify, and Uber, as well as VC firms Andreessen Horowitz and Ribbit Capital. Iliad and Vodafone, two European telecoms companies, are also involved in the project. The members of the Libra Association have committed at least $10 million each toward the project and will participate in governing the crypto, and some will integrate the technology into their services; Vodafone, for example, said it could use the crypto to improve M-Pesa, its widely used African mobile money service, per the Telegraph. That Facebook has convinced these major firms to join is a testament to its huge scale and the lure of having access to its 2.4 billion active users.
Libra will be independent from Facebook a wise move given the company's recent woes.That the association, not Facebook, will govern the crypto is vital for Libra's success. In the aftermath of the Cambridge Analytica scandal, Facebook saw a 66% drop in trust among its users, per NBC. Since then, the company has continued to face a steady stream of data privacy scandals and regulatory scrutiny. Given these challenges, Facebook's plan to disassociate the running of Libra from its core business is a good move but whether users trust that it will be genuine in its intention is yet to be determined.
Facebook has also created a new subsidiary to develop products for Libra. Dubbed Calibra, the new unit will develop a wallet that will enable Facebook Messenger and WhatsApp users to buy, hold, and transfer Libras. While Calibra will be Facebook's way of offering its users access to Libra, third parties, including association members, are free to develop their own alternatives.

The bigger picture: Facebook's user base gives Libra unprecedented potential for success, but the possibility of failure is also substantial.

Adoption of cryptos as a form of payment has been low so far, with Bitcoin functioning more like an investment asset.However, Libra has more than deep resources backing it: Facebook's huge user base gives it an unprecedented advantage over other crypto projects. The social media giant already counts 2.4 billion monthly active users, while attracting the likes of Uber and eBay gives Libra access to these platforms' user bases a powerful combination that could ignite adoption.
And if users react positively to the crypto, it could upend financial services.For instance, the crypto could substantially disintermediate FIs that specialize in cross-border transfers: Facebook says $25 billion is lost by migrants each year on fees to companies like Western Union. By offering substantially cheaper alternatives to these established players, Libra can disintermediate incumbents and fintechs and reshape their role within the industry.
Although Facebook's user base may suggest Libra is already too big to fail, the social media giant's reputation is the elephant in the room.That Facebook has thus far failed to assuage concerns from both regulators and users around data privacy will continue to be a major hurdle it needs to overcome. If Facebook can't sufficiently differentiate Libra from the scandals that have dogged the firm, convincing consumers to trust it with their finances will be a hard push even for a company of Facebook's scale.

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