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It comes as no surprise that Facebook’s new cryptocurrency Libra is causing a stir—especially with increasing privacy concerns and government scrutiny of the company.
While politicians in Washington and Europe alike expressed concerns over the prospective digital currency, blockchain insiders are looking ahead to Libra’s applications—and not just as another cryptocurrency.
“Everybody’s been focused on how do you build a third-generation blockchain. Libra is a take on that,” said Jeremy Allaire, CEO of Circle, a mobile payments platform, at the Fortune Brainstorm Finance conference in Montauk, N.Y., on Wednesday.
But since Facebook’s announcement on Tuesday, Clovyr CEO Amber Baldet wants to know what the project’s ultimate purpose is.
“It’s not entirely clear to me whether they’re attempting to compete in the cashless payments space or in the public cryptocurrency space, which are really two very different things,” said Baldet.
But Allaire doesn’t see Libra as merely a pure-play cashless payments service at all. In fact, he thinks “payments is an initial use case,” but a “much more decentralized, private way to exchange information” is the end goal.
The future will be decentralized
The field is increasingly moving toward more sophisticated, so-called third-generation blockchains. The first-generation blockchain wave was led by Bitcoin; the second by slightly more capable blockchains like Ethereum; and the third will feature massive, decentralized infrastructures with seemingly endless applications.
In fact, according to a PwC survey published in 2018, some 84% of companies are already involved in blockchain.
“The reality is that this is the next major infrastructure layer of the Internet,” Allaire said. “And if you actually study it closely and understand what blockchains are, they’re the fundamental new architecture for how data, identity, financial transactions, lots of things are going to happen. You’re going to reconstruct the way services work on the Internet on public blockchains.”
Allaire suggests regulators on Capitol Hill will need to wake up to the reality of third-generation blockchain’s burgeoning domination of financial services.
“Billions of people are going to be able to transmit value with each other instantly, at no cost. They’re going to be able to move value between economies, between individuals and businesses frictionlessly, and I think there’s been a lot of … denial about whether that would happen and it’s very clear that is happening,” he said.
Internet companies like China-based Tencent are already capitalizing on this new push—even partnering with insurance companies to develop blockchain solutions for the health care industry. Allaire sees Facebook’s move with Libra to be in line with this push.
“I actually think this is a little bit like Bill Gates in 1995 saying, ‘We’re going all in on the open Internet,’ and betting on the open roads. … I think that this is a little bit of [Zuckerberg] doing the same thing, saying, ‘We’re betting on decentralization,’” Allaire said.
The “broadband moment” of cryptocurrency
Much like how broadband was a key factor in early Internet adoption, the Circle CEO suggests third-generation blockchain is “the broadband moment of cryptocurrency” in creating an architecture to support billions of users.
If all goes to plan, Facebook’s currency will go live in 2020, according to company executives. It is still up in the air if the social media giant will actually launch its proposed product, but if it does, its impact could be significant.
“If it launches, which is a big question right now, I believe it will go down in history as being the catalyst that brings digital assets to the global, mass-consumer audience,” said Barry Silbert, CEO of Digital Currency Group.
How will banks respond?
Although Libra itself may not threaten the broader banking industry too much initially, experts say it is clear that blockchain’s full-steam-ahead mentality and widespread applications could soon compete with bank products.
Allaire believes it’s possible to imagine even large Internet companies (not just fintechs) “delivering financial products and services to hundreds of millions or billions of people” in the next five years, in a way that would be “pretty dramatic in terms of the ultimate impact to banks.”
With a global recession and rocky interest rates, Silbert estimates “banks that were built on brick-and-mortar infrastructure … [will] have to figure out how to reinvent themselves to cater toward a mobile-first, digital consumer base.”
Baldet, on the other hand, isn’t so sure.
“Until you can unbundle not just privacy but credit markets, decentralized finance, and everything else, I don’t think that we’re at any risk of the larger-scale banking system going anywhere,” she said.
Regardless of the success of Libra’s launch, blockchain bulls are clear about one thing: Decentralization is the future, and banks need to get on board.