By Matthew Gaude & Shawn McGuire
Back in 2017, Bitcoin burst onto the scene and had everyone in an uproar. While the buzz has died down, it is still in use and companies are exploring ways to use this new digital currency to serve their customers. Facebook recently announced that they will be launching their own cryptocurrency, Libra, in 2020, and many are wondering how this will affect them and if it’s worth their attention. Here’s some information to clear up any confusion and give you some food for thought.
Remind Me…What Is Cryptocurrency?
If you can’t wrap your head around Bitcoin or cryptocurrency, you aren’t alone. It is simply defined as a digital currency that is encrypted so it can never be copied or double-spent. Using a mobile app or computer program as your “wallet,” you can store, receive, and spend Bitcoins with ease around the world.
What Is Facebook Doing With It?
Facebook plans to introduce a new currency called Libra, which is to be managed by the Libra Association, a collaboration made up of some big names in financial services, technology, nonprofits, and more. Facebook’s vision is to create a currency that is stable, secure, independently governed, and provides everyone with access to basic financial services.
As of 2017, 31% of our world was “unbanked,” mostly women and those in developing economies. (1) The Libra Association wants to break down the barriers that prevent people from participating in commerce. Their long-term goal is for people and businesses to use Libra to pay bills, make purchases, ride public transit, etc., without the need for cash.
Once it’s available, users can sign up, selecting from a list of partner payment providers, such as Visa, PayPal, and other financial service companies. Users will also be able to go to local or online currency exchanges and turn U.S. dollars into Libra.
Should I Pay Attention To This?
Once the initial excitement over Bitcoin died down, many people felt that it was just a passing fad. But now that Facebook is joining the trend, people are taking notice. That’s because they already have some big-name backers and they expect a significant amount of their more than two billion followers to use it. They are the first major company to dip their toes into the pool of digital currency and could have the influence to make cryptocurrency a mainstay. Of course, since it hasn’t even launched, this is all just projection.
If Libra does make its way into the world, here are some things to consider when deciding if you are going to join Team Libra.
What Are The Advantages Of Bitcoin?
Bitcoin is not tied to politics or government, so they are not as vulnerable to economic collapse as the currencies we recognize now. All the frustrations connected with banks can be avoided as well. Bitcoin can also be used globally with relative ease. There are no borders for Bitcoin, users can control the fees based on transaction speed, and the process is very transparent, making fraud almost impossible. Cryptocurrency could be useful to people who don’t have easy access to banking services or cash, such as people in crises immediately following natural disasters or other unstable situations.
There is also so much opportunity in Bitcoin. This is brand-new technology. Many compare Bitcoin to technological innovations like email. There was a time when email did not exist as an option, but now it’s revolutionized the way that we all communicate. Will Bitcoin do the same for how we run our economy?
What Are The Drawbacks Of Bitcoin?
While Bitcoin transactions are relatively secure, the Bitcoin exchanges have proven to be highly vulnerable to hackers and scammers. Bitcoin also offers anonymity to its users, leading many to worry that it will become a haven for illicit and illegal behavior. And if you’ve paid attention to the news lately, you know that Facebook has been under fire for its privacy practices. With Libra, countless numbers of people will now be turning over their financial information to the company along with data from every other part of their life.
Facebook plans to address all these drawbacks in their plan. The company’s leaders have stressed that they are taking steps to properly regulate their financial services and protect our identities and privacy. The hope is that their slew of multibillion-dollar corporation backers will secure the process and stabilize the currency. But just the act of creating its own currency shows that the company hopes to skirt banking regulations and compete directly with banks around the world.
Despite its daring vision, Libra might not be enticing enough to rival the U.S. dollar. In recent years, many major currencies have been relatively stable. Not to mention, with the growth of technology, many of us can complete transactions quickly, efficiently, and safely, without having to use physical cash.
We’ll See What The Future Holds
There’s a lot of work to be done before Libra becomes a reality. But Facebook’s actions show that large corporations are wanting to offer something new to their customers and are willing to rock the boat to do it. This is brand-new territory, and no one can truly predict what will happen next.
If you have any questions about cryptocurrency, financial technology, we at Live Oak Wealth Management would love to be your go-to resource. Call our office at 770-552-5968 or email [email protected]. Or, if you prefer, you can simply click here to schedule an appointment online.
Matthew Gaude is an *investment advisor representative and the co-founder of Live Oak Wealth Management, a financial services firm in Roswell, Georgia. He serves the planning and investment needs of corporate employees, those approaching or in retirement, and 401(k) plan sponsors. Working first as a commodity broker and then as a Business Development Manager for a national broker-dealer in previous jobs, he has the insight and experience to help clients understand the complexities of the market and implement strategies to minimize risk. To learn more about Matthew, connect with him on LinkedIn or visit www.liveoakwm.com.
Shawn McGuire is a financial advisor and the co-founder of Live Oak Wealth Management, a financial services firm in Roswell, Georgia. He serves the planning and investment needs of corporate employees, those approaching or in retirement, and 401(k) plan sponsors. He has worked in financial services since 2002 in positions ranging from financial advisor to stock broker and portfolio manager. As a CERTIFIED FINANCIAL PLANNER™ professional, he is trained to help clients with virtually all their financial needs. To learn more about Shawn, connect with him on LinkedIn or visit www.liveoakwm.com.
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