Facebook’s Libra cryptocurrency is making noise all across the globe as last weeks announcement shook the world that the biggest social network in the world was making a stablecoin.
Zuckerberg’s journey into cryptocurrency wasn’t a surprise as the rumour had bee floating around for around a year. It seems that Facebook has a new friend though in Fitch, one of the big three credit rating companies, who gave it the green light in a recent report.
Fitch & Libra
Fitch has clearly got a soft spot for Facebook as they praised the token and looked in its fiat-backed status.
The credit rating firm said:
"A potential advantage of Libra versus other cryptocurrencies is its full backing by a reserve basket of fiat currency assets managed in a reserve fund implemented like a currency board. The size of the reserve fund will be a function of transactional demands, not an arbitrary supply limit or other algorithm as in other cryptocurrency implementations."
As Fitch writes off one of the core concepts of Bitcoin as “arbitrary”, it is more than likely not going to sit well with some figures in the cryptocurrency space. To reason its viewpoint on the Facebook coin, the rating agency indicates that Libra will see long-term benefits from its fiat-backed status.
"These measures could preserve price stability, avoiding the speculative nature of existing cryptocurrencies and improving its utility as a medium of exchange and store of value, which is the key to long-term viability."
Fitch state that Libra is going to function in a similar way to a fiat currency. This explains why they believe it would be better, function wise, than Bitcoin. An interesting idea though is to why they would even attempt to make a cryptocurrency at all.
This is something that Joe Kernen of CNBC brought up and even went as far as to say that Libra isn’t a cryptocurrency at all.
Fitch claims that Facebook have the best intetnions at heart, saying:
"The Libra Association estimates 1.7 billion adults, 1.0 billion of which have a mobile phone and 500 million internet access, are underserved by banks. The association believes this unbanked population can be served by its cryptocurrency enabling near costless transactions and remittances of amounts less than $1 and even approaching just a few cents."