Log In

Reset Password

Facebook’s crypto move ‘positive’ for island

New cryptocurrency: images of what the Calibra digital wallet app might look like. Facebook formed the Calibra subsidiary to create a new digital currency similar to bitcoin for global use, The entry of the social media giant into the digital currency space is viewed by some as a positive for Bermuda’s own fintech ambitions (Photograph by Calibra via AP)

Facebook is to launch a global cryptocurrency next year, and it has been greeted as a positive for Bermuda’s own ambitions in the digital asset and fintech space.

The new currency is called Libra, and its structure resembles that of Ven, the world’s first digital currency, which was created by Bermudian-based Hub Culture in 2007.

Stan Stalnaker, founder of Hub Culture, said the new currency would introduce more than two billion internet users to digital currency at a time when Bermuda had positioned itself early in the world of digital assets.

While Chris Garrod, head of fintech at Conyers, described the news as likely to be an “overall positive” in terms of impact on Bermuda’s fintech efforts.

Libra will be fully-backed by a basket of global currencies and other assets with the aim of giving stability to its day-to-day value. It is being built on blockchain technology, and people will be able to send, receive spend and secure their money in what is described as a” more inclusive global financial system”.

Among organisations involved in the project are Visa, Mastercard, PayPal, eBay, Uber, Lyft and Coinbase.

Those companies and others are part of The Libra Association. It is a not-for-profit organisation that will have a role in the operation of the Libra blockchain. It will be headquartered in Geneva, and have offices in California.

Yesterday, Facebook also unveiled a digital wallet called Calibra, designed to work with Libra, that will allow anyone with a smartphone the ability to send the digital currency as easy as sending a text message, and at low or no cost.

Facebook said that for many people around the world, financial services and access to credit are out of reach. It said Calibra aimed to address that challenge.

Mr Stalnaker, chief strategy officer of Hub Culture, said: “The Facebook Libra project is set to make waves in the world of cryptocurrency and in the traditional world of banks.”

He said it was a long anticipated move after Telegram, a chat network that rivals Whatsapp, announced its intention to enable payments with a cryptocurrency called Grams.

“The development of Visa, PayPal and Mastercard nodes to the system points to the arrival of a payment network that can function between payment networks, changing how payments occur. It is likely to have global reach through Facebook Connect, not just Facebook itself, meaning that single-click payments on the internet are about to become much easier.”

Mr Stalnaker brought Hub Culture’s Innovation Campus, and its Innovation Sprint to Bermuda in 2017 and 2018 respectively. He said Facebook’s Libra project sends a strong signal to the world that crypto “is both here to stay and ready for the world’s biggest payment ecosystems”.

He added: “With transparency and major networks opting in, its hard to see how Libra could fail to become a major force in banking and payments from its inception. This has a strong industry affect; by introducing over two billion internet users to digital currency, its likely that some of them will find their way to bitcoin, Ven, ethereum, EOS and other assets.

“If Facebook’s coin then enters trading markets, it’s a natural way for other currencies to find liquidity relative to the Libra project, boosting their markets in the process.”

Mr Stalnaker noted the similarity between the structure of Libra and that of Ven, which has remained remarkably stable in value during its 12 years of existence.

He said Ven had shown how stable such a strategy can be. “So it is validating to see parts of the Ven model being adopted by other players in the market,” he said.

“Regardless of the relative size of Facebook’s effort to Ven, the community oriented focus of Ven and the values it represents around individual data ownership, transparency and security will continue to differentiate Ven.”

As for the impact to Bermuda. He said: “Every moment counts in the world of digital assets and the stakes are very high, but it is great to see Bermuda positioning itself for the new world of finance early, so that the right frameworks are in place to capture the gigantic opportunities that are emerging in the space.”

Last week Jeremy Cox, executive chairman of the Bermuda Monetary Authority, said the island’s Digital Asset Business Act legislation was produced “in a very short period of time to help the Government to promote the jurisdiction as one of those first-mover jurisdictions to be accepting this type of business”.

Speaking at the Bermuda Captive Conference, he added: “That’s one area of business that we are going to see develop, and I think Bermuda is a wonderful place for that type of business to expand into other areas.”

Meanwhile, Mr Garrod, of Conyers, reacting to the news about Facebook’s digital currency, said: “It is fascinating and certainly, on the face of it, could be seen to be a rival of other cryptocurrencies. However, it is actually very different from them if you delve into detail.

“Cryptocurrencies such as Bitcoin, to date have really only attracted the attention of millennials and those who really don’t use traditional banking. A major player such as Facebook at least will assist with the overall acceptance and usability of blockchain technology, such as crypto and digital assets, those who would never have dipped their toes into this space before.”

He added: “In terms of its impact in the Bermuda space, you’d have to say it is overall positive. It helps provide continuing creditability in the financial world regarding blockchain generally and the way new digital currencies such as Libra can use it. Based on Bermuda’s fairly recent leap into the fintech world, it’s hard to point to any negatives.”