We cannot deny the fact that Libra is one of the largest Fintech projects currently being undertaken in the world. It is also one of the most criticized projects that Facebook has ever considered for the past couple of years. Even their controversy about
selling data to companies wasn’t as “long-discussed” as the future implications of Libra and how it could change the financial world.
However, Libra brought us Fintech supporters quite a philosophical question that we all need to answer. Is the essence of Fintech in creating something new with existing tools such as fiat currencies, or is it through creating new tools for future innovation
The opinions on this matter are mixed. A private company producing currencies is not something completely new. Tokens, virtual coins, and cryptocurrencies have been a thing for multiple businesses all over the world.
Cryptos may be a bit newer, but tokens for buying vouchers or gift-cards have been around for quite some time. But still, the end game of
these tokens and cryptocurrencies are that they are exchanged into fiat currencies and then circulate in the economy.
Libra seems to avoid any need of exchange as it wants the coin to be a very often used medium of exchange compared to the USD. Cryptocurrencies quickly turned into an investment, even if they were not designed to be so, but Libra is deliberately targeting
a goal to become pocket money or the funds we use for daily necessities.
In this case, it needs a completely different approach.
How tokens got popularized
In order to determine the popularity of Libra and why it may turn into an attractive option for people in the future, we need to take a look at how tokens managed to become so popular and why they were used so often in the digital space.
As already mentioned, tokens were basically virtual currencies that customers of a specific platform could purchase with fiat currencies and then use those tokens for various products on the platform.
One of the best examples I can recall about this is when
baccarat casinos were using tokens very often to somehow interest people in starting to play with them. The strategy was pretty obvious.
The casino would create a virtual currency that cost them absolutely nothing. They would then gift these tokens to random people that subscribe to their newsletter or somehow view their ads on various websites.
Once the tokens were gifted, it was designed in a way that would require the players to deposit something in order to achieve a goal and baccarat was one of the more popular options.
People couldn’t perceive that the tokens they had lost while playing were virtual currencies that were pretty worthless. However, after using them, they assigned some kind of value to it and wanted more, which was only available through depositing real funds
on the platform.
Because of this, not too many regulators were keen on allowing casinos to offer tokens in the future as it would create the illusion of free services when in reality it had quite a steep price tag on it.
Companies against companies
We are also aware of one fo the largest corporations in the world who has just recently stepped into the world of finance. Apple has doubled down on its Apple Pay and Apple Card projects and is quickly starting to become an actual alternative for iOS fans
all over the world.
But, that is indeed one of its biggest gripes, that it can only service iPhone users, the number of which could potentially start decreasing if the company continues with its ridiculous pricing models.
Regardless though, Tim Cook, the CEO of Apple
has mentioned very clearly that he does not support private companies releasing currencies as he believes it’s a job designed for the state.
There is some truth to what he is saying as regulating currencies that we use on a daily basis should be approached with no clear profit in mind. It should always be for the benefit of the user rather than the benefit of the issuer.
Therefore, most people conclude that if Facebook has been a for-profit company in the past with its social media platform, it will still retain that same business model after Libra is officially launched.
And because of this, many don’t trust the longevity of the project, even considering that it’s nothing but a stablecoin.
So, is Libra a part of Fintech?
The philosophical question that we asked, in the beginning, does have an answer or at least a subjective answer of all who answer it.
In my case, it’s that regardless of what methods Libra uses, it is still fundamentally involved in finance, and revolves around bringing innovation to it through technology.
That is essentially what Fintech is and will be for the foreseeable future.