The Bank of Facebook

Good Morning

This week Facebook announced a plan to launch a digital coin next year. This comes on the heels of Bitcoin rising out of the ashes after it had a disastrous crash last year. There has been a lot of chatter about the new venture and earlier this week CNBC published an article about their new digital coin called Libra. A couple of takeaways from the article were:

1. Facebook has teamed up with 28 different firms for this venture and created a subsidiary called Calibra to be a digital wallet for the currency

2. Libra is intended to help those who are unbanked (they have no banking account) have a place to store capital

3. Privacy concerns are a headwind for Facebook after data breaches, questionable usage of data, and them selling individuals data

This move is very interesting because Facebook is nearly double the population of China and this announcement adds to the legitimacy of cryptocurrencies (thank you Planet Money -Facebucks episode). What I like about this venture is that they plan on using a basket of country currencies to serve as a base, so it will not be a fiat coin. While I applaud the move, besides the privacy issues I see tons of political headwinds and a cavalier attitude towards the pursuit. From the 28 firms that have teamed up with Facebook, there was not one regulated bank (which has its own positives/negatives). From my first glance after reading a couple of articles I immediately thought about money laundering, reserve ratios, know your client rules, and digital theft.  When going through some of the information based on the initial needs it would still be hard to target the unbanked because they would have to be able to transfer funds into their account.

The movement into the digital currency world is one that was going to come and Facebook might be able to team up with countries like Japan and Singapore easily they have a tough road ahead of them. It is hard to trust a company that has privacy issues to hold all of your liquid funds also.

Comments

Post a Comment

Popular posts from this blog

Tax Time!

Good Morning, The end of January is quickly approaching, which the means tax season is upon us. Everyone hasn’t their own method of filing their taxes, but the new 1040 form is now the size of a postcard. Marketwatch came out with an article highlighting this change and other sources. The key points from the article are: 1. Despite it being smaller, it isn’t more different than simplistic 2. You need to file schedules if you are: itemizing, have business activities, capital gains/losses or dividend/interest income associated with investments, etc. 3. The due date for most taxpayers is 4/15 When the new tax laws were put in place the goal was to simplify the tax code and allow more people to use the standard deduction. What most of us will find out is that with a change to the tax code the size of our refunds/payments will change based on the taxable percentages changing.   The simplification of the tax code might change the need for a tax preparer, but before...
Read more

Federal Reserve Raises Rates Again

(repost from 9/27/2018) Good Morning, Yesterday, the Federal Reserve raised interest rates again this year. The CNNMoney article below covered a couple points worth paying attention to: The Fed does not see tariffs having an impact on the economic data at this time There is some uncertainty with doing another rate increase in the fourth quarter (earlier this year the Fed was split on whether it should do three or four raises), but they plan on doing three increases next year, and one in 2020 Trade tensions between the US and China are a headwind for 2019 growth which is forecasted to be 2.5% (currently we are on track for 3.1% GDP growth) This article lays out expectations for the Fed to raise close to another 1% over the next 2 years which would push interest rates higher. The impact of this will be higher interest rates payments on variable loans, higher interest rate payments for the government, and this will slow down our hot economy. The Federal Reserve is dependent on ...
Read more

Fake Christmas

Good Morning, This year has been a crazy one that seemed more like a soap opera than real life. One of the topics that I have blogged about in the past was the F.I.R.E. (Financial Independence, Retire Early) methodology. When I first learned about this topic earlier this year ( January 2019 post ), I was a little skeptical based on my view that some of its underlying future assumptions are flawed. Last week a proponent of the F.I.R.E. methodology wrote an article for CNBC about why the lifestyle turned out to be unsustainable for his family. The CNBC article highlighted a couple of key points; Income needs were overestimated based on an assumption of higher bond interest Children increase cash-flow needs Healthcare costs were underestimated Location and cost of living were significant factors in the cost of living The overall concept of F.I.R.E. is attractive, but sustainability was always one of my biggest complaints. I am a fan of the concept and the philosophy, bu...
Read more