When Facebook announced its intent to create a new cryptocurrency called Libra, we all thought at least for a second: what if it is the next Bitcoin? Actually, Libra has some strengths that other cryptocurrency, including Bitcoin, do not have.
For example, it has a real target market that could potentially use it. All the cryptocurrencies are born with a report saying that there are many people in underdeveloped countries without access to traditional banking. This is not new. Companies like Western Union and Ria Money Transfer base their business on people who need to transfer money, but do not have a bank account. The potential profits of the market are awesome, but nobody is being able to dominate it at the moment.
The key to dominating a market in the payment or money transfer niches is user adoption. When it comes to Libra or Bitcoin, they will have a real value once you can really use them in your real life. The great advantage of Libra is that Facebook already has a database with millions of potential users who are actually using the social network. As a result, Libra seems, at least at a first glance, better positioned than other cryptocurrencies.
Luis de Guindos, Vice-President of European Central Bank (ECB), was asked about Libra last week. He explained that the ECB does not have anything against Libra, but warned the managers that it should comply with all regulations against money laundering.
Although politicians will never recognise that they are not favourable to cryptocurrencies, the fact is that there is a conflict of interests between regulators and cryptocurrencies. Money is a powerful tool to use both politically and economically. If you lose control of its creation, you lose a lot of power.
Someone thinking about investing in Libra could give it a try just in case it is the next cryptocurrency to explode. But having regulators as enemies, we cannot say that it is a safe investment at all.
France and Germany are already exploring the possibility of launching a public cryptocurrency. We humbly think that this is the future. Governments will not allow others to take a delicious share of the pie. Instead, they will create something useful for those without bank accounts, and we will continue under their management.
Whether this is good or bad is something in which each person would have their own opinion. For now, if you are thinking about investing in Libra once possible, be careful and just do it with an amount of money you can bear losing. With high-risk investments, diversification will prevent you from becoming rich, but also from losing everything.