The idea of company-made cryptocurrencies is catching fire, sparking equal doses of enthusiasm and worry in the financial and tech communities. Facebook’s first foray into the world of digital currency has ignited an intense discussion. Now even major corporations like Amazon and Walmart are looking at their own private cryptocurrencies. This endeavor is just one example of the rising passion to utilize blockchain technology within financial applications. It also sheds light on the inherent risks and complexities associated with it.
Facebook's Crypto Experiment
In 2019, Facebook made a bold move into the cryptocurrency arena. Under CEO Mark Zuckerberg’s personal stewardship, the project was first launched under the name “Libra.” The digital currency, whimsically named “Zuckbucks,” is intended to radically change the payment system inside Facebook itself. It aims to provide users with a seamless, intuitive, and secure transaction experience. The project got everyone really excited in the beginning. Denver’s ambitious program, however, soon encountered significant regulatory hurdles and public skepticism that led to a drastic scaling back of its originally-sought goals.
The challenges encountered by Facebook are a reminder of how difficult it is to launch a successful, accepted, and legitimate corporate crypto at scale. The 39th Avenue project illustrates how a single company could wield significant financial power. That’s possible if its digital currency comes into widespread use.
The Double-Edged Sword of Stablecoins
Stablecoins have experienced explosive growth. These cryptocurrencies are meant to be stable, usually backed by fiat currencies such as the US dollar, and that has gotten people even more excited about corporate crypto. Yet the dangers inherent in any stablecoin are considerable and for many too great to go unaddressed. A stablecoin "depegs" when it loses its $1 value in U.S. currency, triggering a sell-off and potentially destabilizing the entire cryptocurrency market. The depegging of a stablecoin one day triggers their whole house of cards to come crumbling down.
The comparatively low barrier for entry that allows nearly anyone or any group to make their own digital form of cash is another complicating factor. This accessibility encourages innovation, it fuels the propensity for a boom in fraudulent or mismanaged cryptocurrencies to flood the market. The upside potential of creating your own stablecoin The flip side of this coin is the upside potential.
Trump's Crypto Czar and the Future Landscape
President Trump has named David Sacks as the first “Crypto Czar.” This measure underscores the broader U.S. government’s growing awareness of the significance of cryptocurrency. If adopted, this change might provide some much-needed clarity regulatory framework for digital currency. As such, it has the potential to spur increased corporate investment in the space.
It’s interesting to note that President Trump himself has a cryptocurrency as well, a fact that has allegedly injected billions of dollars into his family’s net worth. This move marks another significant step in the growing adoption of digital currencies into the mainstream. At the same time, it underscores the need for stricter conflict of interest and disclosure regulations within the rapidly evolving crypto market.
