Did Facebook, Inc. (NASDAQ:FB) turn Libra into another PayPal?
Last year, Facebook (NASDAQ: FB) assembled a consortium of companies to create an open-source cryptocurrency called Libra. Facebook planned to offer Libra as a payment option in a digital wallet called Calibra, then integrate those payments into Messenger and WhatsApp.
But shortly afterwards, leading members of the consortium — including Visa, Mastercard, and PayPal (NASDAQ: PYPL) — abandoned Libra after government regulators expressed concerns about money laundering, tax evasion, and other illegal transactions. Critics also argued that Facebook’s spotty track record with privacy and security issues made it an unsafe platform for financial transactions.
For a while, it seemed like Facebook would abandon Libra. However, the Libra consortium recently revised its plans to address some of the biggest concerns. Let’s see if those changes will help Facebook finally launch its digital currency.
A less disruptive approach: Libra 2.0
Unlike bitcoin, which isn’t pinned to any fiat currencies, Facebook planned to pin Libra’s value to a broad mixture of currencies and government debt. That approach prevented Libra’s value from being pinned to a single currency and stabilized its price.
It would also turn Libra into an independent digital currency that could freely move across national borders — and that freedom made governments and banks uneasy. Facebook serves 2.5 billion monthly active users, more than the population of any single country on Earth, and a unified currency for all those users could undermine national currencies.
In response, the Libra Association recently decided to issue different versions of Libra directly pinned to individual currencies. It would also issue a “composite” version of Libra, which is pegged to several stable currencies, to facilitate cross-border transactions and serve countries that lack a currency-pegged version of Libra.
For example, Libra would be pegged to the U.S. dollar in the United States, and it must be converted to the composite version for overseas transfers. Boxing in Libra prevents it from overwhelming national currencies and upending the banking system.
Meanwhile, Libra can still accomplish Facebook’s previous goals: to serve the 1.7 billion adults worldwide who lack bank accounts, to enhance Messenger and WhatsApp with new payment features, and to boost the stickiness of its ecosystem.
The consortium also scrapped its plans to turn Libra into a completely open platform, which would have prevented a single authority from controlling the currency. Lastly, the consortium pledged to vet any digital wallet app that wanted to provide Libra payments, instead of leaving those approvals to local regulators.
Those changes indicate the consortium would bear more responsibility governing Libra, and would proactively address its privacy and security issues.
Shayne Heffernan Trade Idea
“Relevant authorities should, where necessary, clarify regulatory powers and address potential gaps in their domestic frameworks to adequately address risks posed by global stablecoins.”
Stablecoin operators must effectively manage risks, be operationally resilient, have safeguards against cyber attacks, and systems for stopping money laundering and terrorist financing. I am yet to see one I would buy. Shayne Heffernan PhD in Economics
Why This Matters
Facebook’s planned cryptocurrency Libra will be linked to individual national currencies and overseen by global watchdogs in a scaled-back revamp it hopes will win regulatory approval.
The prospect of Facebook’s 2.5 billion users adopting Libra has led to intense scrutiny from global regulators, with many worried its launch could erode national control over money.
Libra’s governing body, which is seeking the go-ahead from Switzerland’s markets watchdog, said on Thursday that it will now offer “stablecoins” backed by single currencies, as well as a redesigned token based on these currency-pegged coins.
The original plan was for Libra, which was unveiled last June, to be backed by a wide mixture of currencies and government debt. But central banks and regulators feared it could destabilise monetary policy, facilitate money laundering and erode users’ privacy, with some threatening to block it.
In response, the Libra Association, which will issue the coin and govern its network, said a “college” of central banks, regulators and enforcement agencies from more than 20 countries set up by Swiss watchdog FINMA will have a say in its bid to be licensed as a payments service provider in Switzerland.
The Geneva-based Libra Association declined to give details of the body’s membership and it was not immediately clear how major regulators would respond to Libra’s updated plans.
FINMA on Thursday acknowledged receipt of Libra’s application for a payments system licence, saying the outcome and duration of the process remained open.
It did not elaborate on the role other authorities would play in Libra receiving regulatory approval, but said it was in close contact with authorities and central banks from around the world and saw the need, given the scope of the project, for an “internationally coordinated approach”.
Libra, which had planned to launch by the end of June, now aims to do so between mid-November and the end of the year, Dante Disparte, its head of policy and communications, said.
Overall, the bias in prices is: Downwards.
The projected upper bound is: 198.92.
The projected lower bound is: 156.26.
The projected closing price is: 177.59.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 25 white candles and 25 black candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 69.1771. This is not an overbought or oversold reading. The last signal was a sell 3 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 55.59. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 23 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 84. This is not a topping or bottoming area. The last signal was a sell 3 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 17 period(s) ago.
Rex Takasugi – TD Profile
FACEBOOK INC A closed down -1.000 at 178.240. Volume was 20% below average (neutral) and Bollinger Bands were 13% wider than normal.
Open High Low Close Volume 177.410 180.500 176.770 178.240 16,110,664
Technical Outlook Short Term: Overbought Intermediate Term: Bullish Long Term: Bearish
Moving Averages: 10-period 50-period 200-period Close: 174.75 179.47 191.67 Volatility: 43 82 48 Volume: 22,353,280 23,976,252 16,761,796
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
FACEBOOK INC A is currently 7.0% below its 200-period moving average and is in an upward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods. There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future. Our volume indicators reflect volume flowing into and out of FB.O at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on FB.O and have had this outlook for the last 6 periods.
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