By Yael Tamar and Ido Shacham
With all the buzz around Facebook’s recent announcement of its Libra cryptocurrency, what’s gotten lost in the shuffle is how this will affect digital assets.
On the surface, these look like unrelated questions. Libra’s goal, from its one-sentence mission statement, is “to enable a simple global currency and financial infrastructure that empowers billions of people.”
This doesn’t seem (on the surface) to have anything to do with the world of digital assets: Facebook’s coin is service-based while digital assets are based on underlying real-world assets with tangible value, such as real estate and properties.
Yet in this situation, I’m reminded of the old saying, “A rising tide lifts all boats.” When a giant like Facebook steps into the marketplace, the water level is only going to go up, up, up – boosting every player in the vicinity.
How will Facebook’s announcement of Libra help those of us in the digital assets sector? Here are 3 great ways:
Ask anyone who’s involved in crypto and you’ll hear the same thing – following a number of scandals in recent years, it’s become almost shameful or embarrassing to mention crypto, blockchain, or anything to do with coins or tokens, regardless of how reputable they may be. And that’s a shame.
Another old saying is that one bad apple can spoil the bunch, and that’s probably what’s happened in the blockchain world. As the Library White Paper points out, a number of crypto startups have attempted to sidestep or game the system, including the regulatory and taxation sector, and that’s created an impression of “Wild West” lawlessness that has tainted the whole industry.
But what we’re seeing in the wake of the Facebook announcement is the exact opposite phenomenon. Here, one of the largest public companies in the world is acknowledging the inherent value of cryptocurrency.
By making such a big public announcement and staking their claim in the blockchain realm, Facebook is affirming the core promise of crypto, of stablecoins, and by extension of the potential behind the financial technology of blockchain.
And that in turn will benefit anyone operating in this arena, polishing up the good apples and increasing the odds that a crypto offering – provided it’s backed by a solid management team, full regulatory compliance, and a great, workable concept – can actually be taken seriously once again.
The Libra White Paper is very clear and up front of the topic of regulation, and as someone who’s been working for a long time towards normalizing regulation and taxation of crypto assets here in Israel and abroad, I’m deeply appreciative of their powerful and unequivocal stance:
We believe that collaborating and innovating with the financial sector, including regulators and experts across a variety of industries, is the only way to ensure that a sustainable, secure and trusted framework underpins this new system.
While any new type of asset may initially occupy a sort of grey area, the faster the grey can be resolved into clear black and white, knowing what’s allowed and required in terms of disclosure and compliance, the faster all stakeholders in the field will be able to relax and embrace the legitimacy of crypto assets.
Again, the importance of regulatory clarity applies not only to Libra but throughout the sector. Whether what you’re offering is a stablecoin, a utility token, a security token such as fractionalized real estate, or any other asset, knowing where you stand, compliance-wise, is a critical stage in the maturation of this industry.
The Big Idea behind Libra, according to its initial White Paper, is to democratize financial services for those 1.7 billion adults worldwide who are currently “unbanked” – generally low-income individuals who cannot afford the crippling antiquated service charges and other accessibility problems of traditional banks.
The keyword here is “disruption.” The reason this word has done a complete 180 in the last couple of years is the growing awareness that big institutions are no longer looking out for the interests of smaller players. Disruption, in the sense of doing what we can to break up the monopolies of big players – which are serving as barriers to efficiency in their market – is seen as very good news for ordinary individuals.
The asset digitization process, which we’ve explored here before in the form of tokenization through the blockchain, is one very major way of breaking up monopolies in the real estate industry.
Currently, the industry suffers from a number of serious bottlenecks. While regulation is part of that, part is simply outdated stereotypes of who is involved in real estate investment. Big institutions have nurtured those stereotypes, but it’s time to put them to rest.
With digital assets, real estate investment is and should no longer be the exclusive domain of big corporations and financial institutions, along with a very few high net worth investors. Real estate offers vast potential to ordinary individuals – exactly the type of democratization that Facebook is trying to create through Libra.
Of course, there are plenty of experts who are arguing that Libra isn’t truly going to help the disadvantaged or the unbanked, and that if that was actually the intention, Facebook is going about it all wrong.
But whether Libra ultimately succeeds or fails is irrelevant given the wave of press the announcement has created. Essentially, Facebook has reawakened the world to the potential for blockchain to disrupt the financial services industry, dragging a number of old-school, inefficient enterprises, such as real estate investment, along with it.
And that’s good news for all of us.