In the past decade, cryptocurrencies have made transactions of value simpler than before. Thanks to this, investors are increasingly looking to buy Bitcoin with credit card, among other payment methods. Businesses in different sectors are starting to catch up to the importance of this new financial medium.
Furthermore, blockchain technology has helped bring transparency and reduce fraud in the online commerce industry. This crypto revolution didn’t go unnoticed, and Facebook was one of the first global companies to propose their own cryptocurrency to the world.
However, this didn’t go as smoothly as expected. Facing strict regulations and institutional blockades, Facebook had to delay the launch of their Libra cryptocurrency and even rethink and overhaul their entire approach.
This may have discouraged other companies to release global payment systems such as the one proposed by Facebook. That being said, many global enterprises are eyeing the possibility and opportunity of creating their own cryptocurrency.
In this article, we touch upon the happenings behind the Facebook coin and the regulations that delayed its release. We will also go through some companies that are working actively towards releasing their proprietary crypto and the reasons behind this move.
What Is Diem (Formerly Known As Libra)
The Diem cryptocurrency, (renamed as such on Dec 1, 2020), is supposed to be a global payment system accessible by anyone using a Facebook account. The project is supposed to allow people to use payment services in regions where banking and electronic payments are inaccessible, helping them access the internet economy.
However, at the moment of the announcement, “cryptocurrency” was never mentioned, and for a good reason. Instead of being a decentralized payment system like Bitcoin and other cryptocurrencies, the Facebook payment network is governed by a centralized body. That being said, it does act as a stablecoin and is pegged to the USD, unlike the price of BTC.
The body governing the network is called the Diem Association and was formerly composed of Facebook, together with financial and eCommerce giants such as Visa and eBay.
Why Did Facebook Have To Rethink Its Approach?
Upon the reveal of the cryptocurrency, the move was met by skepticism by regulation bodies all around the world. When it was announced, regulators warned that such a global payment system could disrupt the stability of the global monetary system as we know it.
And while we are used to this kind of rhetoric from regulators in the crypto space, the Facebook digital currency wasn’t met with much enthusiasm by the crypto community either.
The social media company’s notoriety for breaching privacy has made Diem a difficult pill to swallow. Facebook promised that the financial and personal data will be separate on the network, but both regulators and users found this hard to believe. This lead Association partners Visa, eBay, Vodafone, and PayPal to abandon their support of the project.
For this reason, the Libra cryptocurrency was rebranded to Diem, and the project was toned down to comply with regulatory expectations.
What Other Companies Are Planning To Launch Their Crypto In 2021?
Although their project is certainly the most ambitious one, Facebook isn’t the only company launching their proprietary crypto. Below are some essential players in different industries that are actively working at their own cryptocurrency and the reasons why.
Walmart
In mid-2019, the retail giant applied for their proprietary cryptocurrency patent. The coin should be pegged to the US Dollar and the plan is to use it in its internal financial ecosystem.
Some applications of the cryptocurrency that might be implemented are:
- Using it as a method of payment within Walmart stores.
- To track customer purchases and use it as programmable money for loyalty points and discounts.
- Pay part of employees’ bonuses.
- Restrict payments to certain articles, like for alcohol and cigarettes for minors.
JP Morgan Chase
This multinational company specialized in investment and banking services was never very fond of Bitcoin and cryptocurrencies in general. So it came as a general surprise that they were launching their own cryptocurrency.
It’s a coin pegged to the US dollar that will be used to make financial transactions between a small number of their institutional clients.
Mitsubishi UFJ Financial Group (MUFG)
The MUFG plans to launch a cryptocurrency through the Bank of Tokyo-Mitsubishi UFJ, the world’s fourth-largest bank. The cryptocurrency is supposed to be pegged with the Japanese yen in 2021.
At its announcement, the MUFG crypto was to be exclusively used within the group’s financial ecosystem. However, new information shows that users will be able to purchase goods and services in shops, as well as send funds to each other.
Wrapping Up
The Facebook cryptocurrency made quite a turmoil when it was announced. And while it might have contributed to a short bull run, the overall reception was mediocre.
That being said, this didn’t stop other companies to think about releasing their own cryptocurrencies. And with crypto prices soaring, it won’t be a surprise to see even more companies trying to jump on the cryptocurrency bandwagon in 2021.
