Bitcoin is dominant, but it has an onboarding problem.
Its primary issue of attracting adoption is nurtured by an industry filled with opaqueness, scams, and a few puzzling design trade-offs - ones that seem inane to conventional monetary theorists and mainstream users.
Facebook’s anounncement to bring its 2.5 billion users into a new fintech venture, may raise the necessary awareness, and driving change, that cryptocurrencies could use to become more mainstream.
Facebook’s announcement of Calibra, and Libra, was met with support, intrigue, resistance, and suggestions all at once across the world.
The consortium-backed stablecoin, Libra, is supported by major tech firms like PayPal and Uber, while it has also been met with stiff resistance by banking hierarchies, notably France’s push for a G7 task force in response to evaluate Libra’s regulatory legitimacy.
Facebook executives are even scheduled to sit before the U.S. House Financial Services Committee this July to address the sudden emergence of a competitor to legacy banking.
Exchange behemoth, Binance, which was formerly based in Hong Kong before transitioning to the crypto-friendly haven of Malta, has avoided USD trading pairs all the while, opting instead for the stablecoin Tether.
Similarly, BitMEX, a popular Bitcoin derivatives exchange that just surpassed $1 trillion in annual volume, geoblocks US customers from using its platform.
Add in myriad other instances of what clearly seems to be firms avoiding US regulatory ire, which Bitfinex has struggled with, and it is manifest that pressure for a more definitive regulatory framework is not only mounting but necessary.
The size, success, and liquidity of Tethers, which are essentially synthetic dollars, is a salient representation of the sentiment.
Enter Facebook.
Libra’s impending regulatory debate in the public forum, should serve as a marked axis from which the entire regulatory momentum of crypto may shift.
Facebook’s push into payments is not new for big tech: WeChat and ApplePay are already examples of that. Rather, it’s the use of “blockchain” and label of cryptocurrency backed by corporations that will unleash regulatory decision-making, and hopefully, more clarity in the process.
What’s interesting is that, even if Libra is approved or modified before it is approved, it may lend credence to Bitcoin and other cryptocurrencies as more legitimate currencies or stores of value.
The main difference is that Facebook will have executives sitting in front of Congress, while there is no analog for such an instance with Bitcoin.
Even if the worst-case scenario pans out where Libra brings so much regulatory pressure to cryptocurrencies that drive fiat onboarding platforms (i.e., exchanges) into the shadows, at least there will be some form of definitive takeaway rather than an ongoing cat and mouse game of regulatory arbitrage.
In the process, people may begin to understand that government and corporate-issued currencies can exist alongside each other, who knows, even complement each other in an inclusive ecosystem with Bitcoin.
The dark side of cryptocurrency markets are well known, from the seemingly never-ending list of exit scams to exchange operators odiously abusing user funds.
However, the increasing premium on transparency, which is already emerging naturally in crypto markets, should be pushed further by the regulatory developments surrounding Libra.
Standalone initiatives to increase transparency and maturity of crypto markets have been underway before Facebook’s unmasking of Libra.
For example, CoinMarketCap (CMC), the leading crypto rankings and aggregation site, recently rolled out its Data Accountability & Transparency Alliance (DATA), composed of numerous major exchanges and independent analysis site Crypto Briefing.
For their part, Crypto Briefing has announced their analysis product, Simetri, that will be embedded into CMC coin profiles and serve mainstream investors.
Knowledge is power, and the more transparent information that investors are armed with, the better.
Concurrently, DATA is a bid by CMC to enforce stricter reporting guidelines on exchange order book data, mitigating the endemic problems of wash trading.
Similar transparency initiatives include the numerous endeavors by companies (e.g., Blockstream’s proof-of-reserves), metrics sites (e.g., Coinmetrics calling out Ripple), and exchanges (e.g., Kraken revenue reports) to self-regulate and improve transparency.
However, despite these initiatives, the larger adhesive weaving them together is still missing.
Facebook’s Libra should prove the spark that ignites more all-encompassing transparency action in the crypto markets, driven by regulatory developments.
It’s simply too big not to have a lasting impact. For example, should Libra garner support by regulators, potentially onboarding 2.5 billion users in the process - many of whom are in monetarily volatile regions - crypto exchanges may list the currency.
Reports indicate that Binance is already internally discussing listing Libra.
Eventually, this could weed out players of the regulatory arbitrage game, either forcing them to shutter or adhere to regulatory demands.
The transparency of regulations, crypto projects, and exchanges have been consistently lacking in the world of cryptocurrencies since Bitcoin’s inception.
Progress has been made on several fronts to change that narrative before Facebook’s introduction of Libra, but it is Libra that should serve as the ultimate factor that determines how the transparent and regulatory future of cryptocurrencies plays out.
