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Facebook’s cryptocurrency ratchets up pressure on banks, but has big risks


Facebook’s plans to launch its own cryptocurrency and digital wallet should be a clarion call to commercial banks: if you don’t begin to explore blockchain technology, tech companies could eat your lunch.

Worldwide, blockchain-derived business value is forecast to grow from $9 billion this year to $50 billion in 2022, according to Gartner. The greatest growth between now and then is expected to take place in 2020, when Facebook plans to launch its Libra coin and Calibra digital wallet; that year alone will see a 128% annual increase in business value.

Calibra Facebook blockchain libra Facebook

Images of the Calibra digital wallet app.

Clifford Rossi, a finance professor at the University of Maryland’s Robert H. Smith School of Business, said Facebook’s entry into the banking marketplace puts added  pressure on commercial banks at a time when they are already scrambling to learn how to compete against nimbler, tech-savvy fintech companies.

“Given what their ambitions might be, I might start referring to them as Facebook Bank,” Rossi said.

This isn’t the first time Facebook has attempted to enter the financial services industry. Several years ago, it launched its own credit card; after a significant marketing campaign, the effort fizzled with little uptake, Rossi said. Libra coin, however, is a different animal. For one, Facebook has wrangled partner support from dozens of major corporations, including financial services providers such as Visa and Mastercard.

“This makes sense from the standpoint that our payments processing capabilities over the past 50 years are inefficient and they’re also fairly costly when you think about the charges. If you look at Visa and Mastercard and even retailers who have to pay interchange fees [from banks], they’ll tell you there has to be a better way,” Rossi said. “So, I get what Facebook is trying to do.



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