What does Facebook Crypyocurrency means?
According to news reports, Facebook will shortly launchLibra, a global cryptocurrency available to users (including Messenger and Whatsapp).Persuambly any merchant with account in these platforms could transact in the cryptocurrency.Facebook this week revealed plans to announce detaols on 18th June and confirmed its cryptocurrency will be Stablecoin.
Facebook’s cryptocurrency will be a powerful force for goods in developing countries, which is where Facebook intends to market the product.
Because central banks in developing countries are notorious for their lack of discipline in maintaining the value of their fiat currencies, which too often lose purchasing power. The best example among many is Venezuela, which is experiencing hyper_inflation worse than that of Germany after World War I. By providing citizens of developing nations with access to a store-of-value that is more reliable than their government-backed currencies, Facebook’s cryptocurrency will indirectly exert fiscal and monetary discipline on developing nations—which will improve the lives of many people globally.
Facebook will pay interest to holders of its cryptocurrency, and this will eventually lead to populist calls to repeal corporate subsidies to banks at the heart of the US banking system.
Because the assets backing the cryptocurrency will generate interest income (especially if, according to some reports, that basket includes “low-risk securities”). If Facebook doesn’t share these interest spoils with users, a chorus of critics will loudly publicize how much money Facebook and its partners are pocketing.
What’s the magnitude of the interest income at play? If Facebook parks the entire US dollar balance at the Federal Reserve via one of its bank partners, for example, it could earn 2.35% risk-free—that’s $235 million for every $10 billion deposited into its cryptocurrency. These profits will quickly turn into a new hot potato for Facebook politically, if not shared with users.
But there’s a side benefit—the brouhaha this issue could create would reveal the magnitude of corporate welfare at the heart of the US banking system. The 2.35% number is the actual interest rate the Fed pays its member banks for interest on excess reserves (IOER)—and this year it’s projected to amount to $36 billion of corporate welfare paid to US banks, which equates to roughly half the amount the US spends on its food stamp program. Just imagine how critics will have a field day shouting “corporate welfare for Facebook” if Facebook and its partners simply pocket that amount.
It’s true that other stablecoin issuers almost always pocket the float rather than sharing it with their customers. But Facebook’s stablecoin will probably be too big and visible to get away with this—so it’s unlikely to be able to sweep the issue under the rug. That’s a good segue to the next point.