It’s been over two months since Facebook’s Libra whitepaper was released, and it has been met with criticism from regulators all around the world. In the wake of this development, many new projects have been perceived as having the potential to replace or ultimately cause the demise of Facebook’s cryptocurrency project.
In this article, we will give you a summary of four projects that have emerged in the wake of Libra’s whitepaper and that could potentially pose a risk to Libra, or adopt the title of being the “Libra killer”. We will be paying special attention to what they are, how they relate to Libra, and the response from the community.
This might be surprising given China’s history of prohibition and strict regulation of cryptocurrencies, but reports of the development of a national digital currency for China appeared soon after the Libra whitepaper was first published, allegedly because Libra had the potential to put the country’s financial ecosystem at risk. However, an in-depth look at the project overseen by The People’s Bank of China (PBoC) is enough to understand that China is not looking to release their own version of the Libra stablecoin, but rather preemptively protect themselves against the advent of a global cryptocurrency.
Mu Changchun, deputy director of the payments department of China’s central bank, stated at an Aug. 10 event at the China Finance 40 Forum that, after five years of research, the PBoC’s digital currency “can now be said to be ready.” Not many technical details have been revealed, but it seems that China is pushing towards a centralized digital currency rather than a cryptocurrency. According to initial reports, the Digital Money Research Group of the bank had initially developed a prototype that fully adopted the architecture of a blockchain, but this was later changed to a two-tier operating system in order to support the sheer volume of retail sales in China.
The two-tier operating system will consist of an upper level controlled by the PBoC, and a secondary level, controlled by commercial banks. Thanks to this system, accessibility, adoption rates, and innovation among commercial entities will reportedly flourish. This system, however, raises red flags concerning the nature of the currency, since it is by design highly centralized and has the PBoC as the overseeing entity that has control over all operations.
As Cointelegraph reports, the new digital currency will bolster investment in the country, but more importantly, it will bypass the trade sanctions imposed by Donald Trump in July of 2018. Additionally, it was also reported that powerful Chinese companies such as Huawei, Alibaba, and Tencent could be involved in the project.
These features separate the Chinese digital currency from cryptocurrencies and altcoins in general, but, as it has been stated, its development is closely related to the Libra whitepaper. Wang Xin, director of the Research Bureau at the PBoC, stated soon after the release of the Libra whitepaper that different economies will have to decide on how to cope with it, hinting at the possibility of multiple nations having their own digital currencies in the future.
According to PBoC personnel, the initiative of issuing a national digital currency might be adopted by other countries.
While many technical details are still unknown about China’s digital currency, the feedback from the crypto community quickly showed the negative sentiment surrounding the project, mostly due to its highly centralized nature and the degree of involvement from the PBoC.
Senior market analyst at eToro Mati Greenspan stated that the project has more to do with political power than fintech innovation, since it would allow the Chinese state to keep a strong eye on [the] money supply: “they want a greater level of control and surveillance (...) this will give them a bit more hands-on authority”. Most forms of crypto, Greenspan argues, are designed to bolster people’s financial freedom, but the Chinese national digital currency is designed to give the Chinese government more tools to control and monitor transactions.
In a similar vein, Ben Yorke, an American entrepreneur based in China, highlighted the fact that the project will not be public and will feature a private chain, disregarding reputable Chinese crypto startups that could have otherwise contributed to the project. Yorke additionally reports on already-existing digital currencies that exist in the country, namely Alipay and WeChat Pay, which are two popular alternatives that are already widely adopted in China, with more than 57 billion mobile transactions being processed in 2018 alone. These payment alternatives are not anonymity-friendly, since transactions are tied to personal information, identification, and bank accounts. It is expected for the Chinese national digital currency to follow suit in order to track and monitor transactions.
After Libra was announced, one of the most criticized points was that the currency was going to be managed by a group of corporations known as the Libra Association, which led to people having privacy concerns. However, China one-upped Libra in this regard, since the PBoC will be at the top of the hierarchy, and the commercial banks on the second tier will be most likely heavily influenced by the Chinese state as well.
Despite being touted by the media as China’s response to Libra, the two currencies have one fundamental difference: Libra will be a separate currency that will be used by people from all continents in the world, whereas this project is designed to be a digitized version of the Chinese yuan, to be used only within the borders of China as a way to make the yuan a stronger currency. Still, given China’s economic power and population of almost 1.4B, this digital currency could be a headache for Libra.
One thing that became clear with the Libra whitepaper is that stablecoins are playing an increasingly bigger role in crypto. In order to compete with Libra, which intends to back its currency with a basket of real assets on a global scale, Binance announced their own stablecoin project, Venus, on Aug. 19.
As per the announcement, Venus is an open blockchain project that has the objective of developing local stablecoins around the world. To achieve this, Binance is looking for potential partnerships with governments, corporations, companies, and startups that are involved in the crypto industry.
Much like other Binance products, Venus will benefit from Binance’s existing technology, infrastructure, and reputation. Additionally, Binance has recently issued two stablecoins: the Bitcoin-pegged stablecoin BTCB in June, and the British pound-backed stablecoin BGBP the following month.
In relation to the role of stablecoins, Binance co-founder Yi He was quoted as saying: “We believe that in the near future as well as long term, stablecoins will progressively replace traditional fiat currencies in countries around the world, and bring a new and balanced standard to the digital economy.
Yi He, Binance’s co-founder and CMO has stated that stablecoins will slowly but surely replace fiat currencies.
The announcement of Binance Venus quickly elicited a response from members of the industry, including stablecoin developers. Gregory Klumov, CEO of the Stasis stablecoin platform (responsible for the EURS stablecoin), expressed his concern about Binance mixing the functions of digital asset creation and trading activities, arguing that these activities should remain separate in order to avoid a conflict of interest. He nevertheless added that this was a positive accomplishment for digital assets in the long-term, allowing the industry to evolve and adapt to new technologies.
One community member adamantly claimed that Binance was “ready to dominate the world” after the announcement. This prompted a reply from Changpeng Zhao himself, who replied that Venus would push mass adoption and would most likely help Libra instead of dominating it, saying that Binance was “happy to co-exist”.
However, later reports would indicate that this tweet was part of a distinct narrative for western audiences only. As reported by Dovey Wan on Twitter, the Chinese version of the announcement was longer, taking a much more aggressive marketing approach. By translating the Chinese announcement, some phrases such as “financial hegemony”, and, “reshape the world financial system” are encountered, which hint at the fact that maybe Binance isn’t exactly thrilled about co-existing with potential competitors. Finally, the Chinese announcement addresses Libra directly by describing Venus as an “independent and autonomous, regional version of Libra.”
Upon further inspection, it was discovered that the announcement had a much stronger wording in the Chinese version.
Binance Venus shares more similarities with Libra than the Chinese national digital currency, mostly due to the fact that it entails the creation of a new cryptocurrency rather than a digital version of a fiat currency. However, one difference remains—Libra is deemed as a global currency that will be usable by (almost) anybody, whereas the stablecoins of Binance Venus will depend on specific alliances and partnerships. This also means that Binance will be able to be selective and tap into specific markets due to favorable market conditions or jurisdictions.
On Aug. 1, the U.S Patent and Trademark Office (USPTO) published a patent filing for the development of a “system and method for digital currency via blockchain”, filed by Walmart Apollo, LLC on Jan. 29, 2019. Walmart’s patent describes the development of a USD-pegged stablecoin that works for purchasing goods and services at selected retailers and partners. The coin may have some restrictions related to products and venues, but those are still to be determined.
Like Libra, one of Walmart’s stablecoin purposes is to provide a financial solution to those who do not have access to banking solutions, as well as provide a fee-free or fee-minimal place to store funds. The filing states that households with low incomes can have problems getting credit from banks or carrying cash, but Walmart’s digital stablecoin could remove these hurdles and inconveniences while providing customers with the option to “handle wealth at an institution that can supply the majority of their day-to-day financial and product needs”. It has also been reported that the coin could earn interest as well as restrict certain product categories from being purchased by minors (like alcohol or cigarettes).
According to experts, Walmart’s cryptocurrency won’t have as much trouble getting approved by the corresponding authorities, which could mean that it could see the light of day earlier than Libra. Jaret Seiberg, senior policy analyst at investment banking corporation Cowen, stated that the Walmart cryptocurrency differs from Libra in scale, since the Facebook cryptocurrency has the intention of going global. Seiberg also stated that the Walmart stablecoin may appeal to Democratic legislators that are looking to find a financial infrastructure alternative for people without access to banks, but at the same time may pose a threat to small banks and credit unions, which could stall approval from Congress.
In a different report, Joe Ciccolo, president of the KYC/AML compliance advisory for Bitcoin and cryptocurrency startups company BitAML, speculated that the patent filing is another move by Walmart to gain entry into the financial sector and eventually obtain a bank charter or license. Walmart has dropped multiple projects due to concerns raised by state and federal lawmakers regarding giant players of a determined industry entering the financial services industry, in addition to criticism from banking industry officials and watchdog groups. Ciccolo also adds that the Walmart cryptocurrency may be a significant cost-saving system to the company with regards to fees and surcharges associated with regular financial transactions, but it is unlikely that it will receive regulatory approval due to the aforementioned concerns of regulators and the potential market impact they could have.
According to a Walmart representative, despite the patent being filed almost 7 months ago, there isn’t a crypto asset in the works at the moment and there’s no set date for the beginning of the development.
In the wake of this news, there have been mixed responses towards Walmart’s cryptocurrency. In a CCN news post, the Walmart cryptocurrency is deemed as “financial liberation” as the retail giant currently has more than 2 million employees in the U.S, all of whom could potentially get paid in the new cryptocurrency, finding themselves with “access to the budding global crypto economy”.
Walmart currently employs more than 2.2 million people in the U.S, all of whom could be paid in the cryptocurrency.
However, some media outlets have singled out the fact that most of the people that work at Walmart are not the cryptocurrencies’ typical audience. In a reddit thread, the reaction to the news was not positive at all, with every comment showing discomfort or disapproval towards the cryptocurrency and stating they would definitely not want to be paid in Walmart coins, with one user stating that if they start paying them with it they would stop working at the store. Other user stated that they wouldn’t mind being paid in a “useful cryptocurrency like monero or bitcoin” but not in Walmart coins.
Walmart employees display their disapproval of the new cryptocurrency.
Metal Pay stands out among the other projects on this list due to two reasons: it has an app that is already live on the Apple iOS App Store, and, unlike the others, it has been actively marketed as the Libra killer. Most notably, this marketing campaign is spearheaded by its lead investor, none other than 20-year old Erik Finman, better known as the “youngest Bitcoin millionaire”.
Metal Pay is a P2P payments platform where users can easily send cryptocurrencies to each other. As of right now, Metal Pay supports 18 cryptocurrencies (including BTC, ETH, TUSD, among others), but its main selling point is that users earn MTL (Metal Pay’s native cryptocurrency) whenever they make payments on the platform.
Its self-appointed status of Libra killer seemingly stems from the fact that Metal Pay is “exactly what Libra wants to be but could never become” — an all-in-one digital banking platform for crypto.
Erik Finman (20), became a millionaire at only 18-years-old after investing in Bitcoin at the age of 12. He is the lead investor of Metal Pay.
But it doesn’t stop there. In the same Aug. 19 blog post, Finman goes as far as to say that Bitcoin could become the next MySpace, arguing that it could soon become a thing of the past. He argues that regulatory issues, scalability, and a fragmented community with many hard forks have negatively affected Bitcoin, and that Metal Pay, not Libra, will be the “logical evolution of cryptocurrency”.
The MTL coin was listed on Binance on Aug. 21, which led to impressive results. However, it seems like its price is highly volatile, since it was 58% higher only last month, before any listings and announcements had been made.
People were quick to find the fallacies and plot holes in Finman’s narrative. In a reply to the blog post, multiple readers pointed out that most of his arguments were based on false assumptions (such as saying that BTC had a fragmented community or had ridiculous fees and transaction times, something completely bypassed thanks to the Lightning Network) and misinformation (such as implying that Bitcoin is facing regulatory hurdles that MTL would not have to face). Commenters on the blog post showed that there was no real argument that put MTL over Bitcoin, and that the “Libra killer” moniker was nothing more than an opportunistic instance of marketing.
Phrases such as “an independent version of Libra” and “the Libra killer” are just the latest additions to the never-ending list of buzzwords used to promote cryptocurrencies. Given the negative reaction that the Libra whitepaper had, some startups such as Metal Pay took advantage of the situation and fashioned themselves as the project that would effectively kill Libra, while other projects decided to ride on Libra’s coattails in order to garner more attention from the media. Other projects, such as Walmart, have seen their own cryptocurrency projects receive more attention, even when they’re not intrinsically related to Libra. One main plot hole to some of these projects is that Libra hasn’t even been released yet, and we aren’t even sure that it will eventually be released, which renders comparisons and promises to be the new Libra a futile endeavor.
In reality, none of these projects can “kill” or replace Libra because they have a limited application or because they’re simply too different and/or have different goals than Facebook’s cryptocurrency. However, most of these do have the potential to be massively adopted in different contexts, which could indeed pose a threat to Libra. That being said, these startups could actually benefit Libra as well if they flourish, since their success could potentially sway the opinion of regulators and politicians in their own legislations and eventually across the globe.
Thank you for reading,
The COIN360 Editorial Team