Facebook’s [FB] eagerly anticipated cryptocurrency, Libra, has signed up some of the biggest names in technology as partners, with Paypal [PYPL], Uber [UBER], eBay [EBAY], Visa [V] and Spotify [SPOT] all seeing the potential. However, one Libra partner – Mastercard [MA] – is already putting together its own cryptocurrency team, which begs the question of whether Libra will be soon swamped with competition from other mainstream companies – including ones that do not have the same privacy concerns.
Mastercard’s move to establish a crypto team pre-empts a likely evolution in the payment provider industry as technology continues to reshape the financial world. Ted Rossman of CreditCards.com said Mastercard “wants to be known as more than a card company; it wants to be a technology company”.
Mastercard Senior Vice President Seth Eisen meanwhile told the New York Post, which broke the story, that “looking at” blockchain and cryptocurrencies is part of finding new ways to add value to customers.
Mastercard’s move will undoubtedly be seen as a wider signal that crypto is going mainstream, which could produce further bullish sentiment for bitcoin. The recent rally in bitcoin value was widely seen as a result of Facebook’s Libra announcement.
Facebook could also soon see competition from Apple [AAPL], which signalled a move into crypto in early June when it revealed a new a "cryptographic" developer tool.
For Facebook, the ability for Libra payments to be made across Facebook, WhatsApp and Instagram, as well as for services like Uber and Spotify, is a compelling offer; the key will now be how fast adoption can spread through its users and beyond.
When Facebook officially announced the planned Q1 2020 launch of Libra on 18 June, cryptocurrency sceptics were quick to point out the obstacles in the way of making it a success. Working collaboratively with the deeply entrenched and rigid regulatory minefield that governs global finance, could prove the most significant.
|PE ratio (TTM)||31.25|
|Quarterly Revenue Growth (YoY)||27.60%|
Facebook share price vitals, Yahoo Finance, 21 August 2019
And Libra is already being attacked by regulators and lawmakers across the US and Europe. While EU antitrust regulators have already launched a probe, one US lawmaker – Brad Sherman – called the announcement “worse than 9/11”.
The chair of Congress’ House Financial Services Committee, Maxine Waters, meanwhile said in a statement: "Facebook's plans raise serious privacy, trading, national security, and monetary policy concerns, not only for Facebook's over 2 billion users, who will have immediate access to these products, but also for consumers, investors and the global economy.”
“Facebook's plans raise serious privacy, trading, national security, and monetary policy concerns, not only for Facebook's over 2 billion users, who will have immediate access to these products, but also for consumers, investors and the global economy” - chair of Congress’ House Financial Services Committee, Maxine Waters
For the time being, Libra seems to be only bolstering analysts’ views on Facebook. In the month following the announcement, Facebook’s share price grew more than 5%, and while it is now trading slightly below pre-announcement levels, most analysts agree it is set for a rally.
Of 44 analysts tracked by Market Beat, 41 have a buy rating and three a hold rating, with a consensus price target of $222, representing a 21% upside from its 20 August price.
It’s worth noting that this isn’t the first time Facebook has looked to launch its own currency. The firm first tried to introduce Facebook Credit exclusively for users back in 2010, an idea that was pulled after just two years.
Almost a decade later, it seems the technology may be there to make a go of it, but it remains to be seen just how many competing tech and payments companies will do the same.