This past week, Facebook announced it would launch a new digital currency called Libra. This form of payment will differ from other digital currencies because it will be backed by government monies and securities. Facebook is banking on a sizable portion of its 2.4 billion userssigning up, as well as a large proportion of the 1.7 billion people across the globe who do not keep money in traditional banks.
Here are five facts about Libra and the greater digital currency landscape today.
- Digital currencies are not legal tender, not controlled by a central bank, and do not existin physical form. Rather, they are decentralized digital cash systems. Digital currencies exist in a virtual wallet, are designed to have minimal processing fees, and can be transferred via computers, smartphones, and the internet, according to Market Business News. One source reports that there were 32 million blockchain wallets as of the last quarter of 2018. The goal is to ease the ability to complete transactions.
- Today, the most popular digital currencies worldwide include Bitcoin, Ethereum, and Ripple. Bitcoin is considered the de facto digital currency and has a market capitalization of roughly$45 billion(and approximately 32 million users). Ethereum is the second biggest cryptocurrency after Bitcoin and has a market capitalization of roughly $18 billion. And Ripple, launched in 2012, has a market capitalization of roughly $6 billion.
- While cryptocurrencies have become increasingly ubiquitous, they have not been uniformly regulatedacross the world. CNBC reports that the United States has been using its existing legal framework to attempt to regulate the crypto-industry rather than introduce new laws. As of now, the SEC has said that digital currencies are not securities and will not modify security laws in order to give the agency jurisdiction over them.
- Libra, Facebook’s new global digital currency, differs from Bitcoin in a few key ways. First, Libra is being backed by some of the world’s largest corporations, including Mastercard, Uber, Visa, and PayPal. Bitcoin is not officially supported by any of these mainstream institutions. While there are still hefty fees to trade in Bitcoin, Libra is designed to have low transaction fees. And while Libra is backed by a number of currencies and low-risk securities,Bitcoin is not.
- Facebook is far from the only corporation that has rolled out, or is planning to roll out, digital currencies. In February, JP Morgan announced the “JPM Coin,” which is the first cryptocurrency created by a U.S. bank. AirAsia, a low-cost carrier based out of Malaysia, has launched a cryptocurrency-basedrewards program. And Mitsubishi, Japan’s biggest bank, is launching ablockchain-based payment system in 2020.
