Press Release: June 21, 2019 9:15 CAT | Source: Luno
By Marcus Swanepoel, CEO of Luno, a global cryptocurrency platform now has 2.7 million customers in 40 countries.
The announcement of Libra, the Facebook-initiated global cryptocurrency, is extremely important news for the entire global financial services industry. We’ve seen our fair share of crypto hypes over the past few years, including ICOs and ‘blockchain can solve everything’, but this is most certainly not one of them. In our view, this is a game changer not just for the cryptocurrency industry, but also the broader financial system.
There is a very real need for a better financial system in developing economies, and how decentralised cryptocurrencies (and in particular coins pegged to real-world currencies or assets) would play a key role in impacting this. This ranges across many use cases including remittances, e-commerce, interoperability and connecting large unbanked populations to the financial system. We see these new types of crypto instruments unlocking an enormous amount of value to consumers in these markets, impacting billions of lives positively in the process.
These new types of crypto instruments solve a number of the more traditional cryptocurrencies’ challenges, albeit to various degrees of success. Most of them eliminate volatility, add some better short-term scalability, and they also increase trust by being easier to understand. The one major issue is still distribution and getting it into many people’s hands as quickly and economically as possible.
Libra really presents us with the trifecta. Not only does it do better on trust (it’s linked to a basket of currencies people already trust and understand, and the issuer is associated with a major trusted global company), as well as volatility (with a more balanced and smart issuing mechanism, but ultimately more stable), but it really solves the distribution problem in two big ways.
Firstly, should Facebook add Libra to all Facebook products, it will instantly bring billions of people closer to the crypto realm. And, secondly, it will indirectly solve distribution issues by instilling broader acceptance, essentially solving the bigger ‘chicken and egg’ problem — which merchant or company would not want to add a currency that will be available to billions of people all over the world already using all these social networks? It is this combination that, in our view, makes Libra arguably one of the biggest innovations in modern financial history.
It won’t be without its challenges though, and it’s important to be pragmatic when it comes to new and untested technologies. The safety and security of Libra’s blockchain has not been tested at scale, compared to Bitcoin and others that have been around for many years. This is an existential risk to the system.
There will also continue to be regulatory challenges, for example with capital controls which are a reality of life in most developing economies. To enable many of the most important use cases, they will still likely require locally licensed players to support them, and most certainly access to local crypto-to-fiat liquidity pools, and at a scale and level of reliability that many of these are not equipped to deal with.
They will also have to contend with diverging views on how important and positive this technology could be for various developing economies: Some might welcome it as a big opportunity, others might see it as a threat to their economies. While it makes big gains in terms of making it easier to understand than most other cryptocurrencies, there will still have to be a lot of local education needed at both the consumer and broader stakeholder level, including the media, banks and regulators. In our view, these challenges are not insurmountable, especially where the association works with strong local partners to drive education, acceptance and adoption.
We believe that in the long run, Libra will significantly increase the rate and penetration of crypto adoption globally, both for Libra and other currencies like Bitcoin. We’re excited to support this project over the coming months and years, working closely with all stakeholders across all the markets we operate in and look forward to leveraging this technology to continue to drive our ultimate goal of upgrading the world to a better financial system.
This article is a Press Release received from Luno. SA Crypto did not receive any form of compensation for its publication, and as this material is deemed newsworthy for the Southern African blockchain industry, it was thus published accordingly.