Bitcoin and Libra Competitors on the Horizon in the Race for a Global Cryptocurrency
Although a global digital currency has been enticing for regulators, Libra has failed to convince they'll earn the world's favor.
- The announcement of Celo Network earlier this year marked the first true rival for Facebook’s Libra.
- a16z believes more competitors could emerge, putting stress on Libra, forcing regulators to take action.
- Libra’s failure thus far stems from Facebook’s scandalous past and its initial plan of introducing a new currency.
- The winner of this race will likely be the one that operates without threatening the state’s monopoly over the monetary system.
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Despite Libra’s various obstacles, there is still room for regulatory approval of a global digital currency. Investment fund a16z expects more companies like Libra to emerge, and some of them might even find a winning formula.
a16z Funding Global Crypto Networks
Facebook’s announcement that they would be spearheading the launch of a crypto payment network earned the attention of consumers, institutions, and governments alike.
As the hype unfolded, competitors have emerged. Celo Network, a blockchain-based platform that aims to improve financial inclusion, is one of those competitors.
Besides the company’s goal of improving financial inclusion and bringing digital money to the unbanked, Libra and Celo have another similarity: both raised capital from a16z.
In an interview with Bloomberg, Katie Braun, a general partner at a16z, broke down the fund’s investment thesis. Braun highlighted a16z’s focus sectors within the crypto economy, which includes a category the firm defines as “internet money.”
“The third category is what we call Internet money, and this is building off the idea of Bitcoin but it’s solving for limitations of Bitcoin. Here you’ve seen us make investments in projects like Celo and Libra. And we think there will be other entrants in this category,” Braun told Bloomberg.
Libra’s announcement whipped up a media storm and attracted unwavering critics from various arms of the governments. Finance ministers and central bankers from every continent have condemned Libra, rubbishing the notion that money can be privatized.
Part of the reason for the backlash was Libra’s insistence on creating a currency that was backed by a basket of existing fiat currencies – an idea they have since discarded. The other reason is that Facebook, a company notorious for data collection, would play a central role in the Libra consortium.
But it also had a formidable vision: a universal medium of exchange.
New companies locking in on this goal could recreate Libra’s value proposition in a way that is digestible to regulators while still furthering the advent of digital money.
These networks will introduce some degree of centralization, however, making it a stretch to compare them with Bitcoin.