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In 2019, Facebook first proposed a new cryptocurrency network on its social media platform that would change the way the world banks. In response, they were hit with major backlash from regulators because of concerns over instability of cryptocurrency like bitcoin. Over the last month, Facebook has been at it again, pushing for approval for Diem, an independent organization. Diem, formerly known as Libra in 2019, is an independent cryptocurrency network that proposes to utilize a coin, or token, called a stablecoin.
A stablecoin, like bitcoin, is based on cryptocurrency’s blockchain technology. However, unlike bitcoin, a stablecoin, would be attached to an established, regulated form of currency, such as the U.S. dollar, thereby stabilizing it. Because the stablecoin is secured by a major form of currency, Facebook hopes their proposed use of stablecoins as cryptocurrency on their social media platform will minimize financial risks and ease regulators’ concerns.
The Diem-based payments platform that Facebook proposes is called “Novi”. Novi would be Facebook’s “wallet,” available to Facebook-users to store their cryptocurrency. They could then use Novi to make online payments with convenience and ease. Facebook argues that by providing Novi to their users, they could facilitate online payments for people all over the world. This would help the under-served who don’t have access to traditional bank accounts. Despite the proposed stability of the stablecoin cryptocurrency, financial regulators still believe this form of cryptocurrency poses risks for Americans. One of the risks includes a potential major economic crisis.
To put it simply, consumers could park large amounts of money in cryptocurrency accounts and then liquidate those accounts in the event of a world-wide crisis, like the 2020 pandemic. In this event, America could experience another recession, or worse, an all-out stock market crash. Regardless of the pushback Facebook has received in the recent weeks from government officials and financial regulators, they are determined to move forward with the project, and to provide the entire world with access to banking at the click of a button.
What do you think about Facebook’s push for cryptocurrency? Let us know down in the comments.
This article originally published on GREY Journal.