Will You Friend Facebook's Cryptocurrency?

What Our Experts Say About Facebook and Libra

Jun 20, 2019
Finance
Technology

SMITH BRAIN TRUST – Who will “friend” the new Facebook cryptocurrency? Maryland Smith experts weighed in, after the social media giant’s announcement that it would launch a new blockchain-based payment service, called Libra.

They questioned the timing of the decision, forecast how Facebook might change the cryptocurrency marketplace with the strength of its 2.4 billion monthly active users worldwide, and explored what the move means for traditional banks.

Joseph P. Bailey“Facebook is trying to still address issues of privacy, security, and perceptions of consumer trust in the wake of the Facebook-Cambridge Analytica data scandal and government concerns. This does not seem like the best time to use its brand to move into the cryptocurrency marketplace. That said, I suspect that there may be a small window of opportunity to have a Facebook-supported cryptocurrency shape the already crowded market. If Facebook sees this market as a winner-take-all marketplace, the window of opportunity to potentially leverage Facebook's network of users to become the cryptocurrency leader may be closing.”
Joseph P. Bailey, associate research professor in the decision, operations and information technologies department at the University of Maryland's Robert H. Smith School of Business and executive director of the QUEST Honors Program.


Clifford Rossi“Facebook's announcement that it would launch a cryptocurrency called Libra ratchets up the pressure on commercial banks, at a time when they are already scrambling to learn how to compete against nimbler and tech-savvy fintech companies. While Facebook looks to tap a new reservoir of customer data, their spotty track record of late in protecting sensitive personal information, provides further proof that the tech giants should face tighter regulatory scrutiny. Linkages between cryptocurrencies and cyber-risk are not well understood at this point. The cryptocurrency revolution is here, and so are its risks. Beware.”
Clifford Rossi, Executive-in-Residence and Professor of the Practice in finance.


David Kass“Facebook is looking to build a payments network by creating an online ecosystem on which users can buy things and pay each other. The cryptocurrency network will be governed by Facebook and more than two dozen founding partners as part of a nonprofit consortium the company hopes to grow further. Facebook will lead Calibra through 2019, but eventually the consortium will take over. At this early stage, it is not clear to me how successful Facebook will be with this initiative nor how profitable it will be.”
David Kass, clinical professor of finance.

 


Henry Lucas“Libra is an innovative and creative idea. It is clear that Facebook has the scale and resources to pull this off. A large number of partners are on board and making investments in the Libra effort. A Facebook subsidiary called Calibra will participate in Libra separately from the social media giant and Facebook is promising strong privacy and no targeted ads. The Libra Association will operate the system as a nonprofit in Switzerland. Libra will use blockchain technology which provides instant payments through a secure distributed ledger. A currency like Libra will enjoy low transaction costs and should appeal to people in countries that lack a well-developed financial system – the large population in the world without bank accounts and debit or credit cards. How will governments react? Does the U.S. Federal Reserve want a very large cryptocurrency ecosystem which it cannot influence through its traditional tools for managing our monetary system? These and other questions will have to be answered over the next few months. For now Libra is an exciting venture with huge future potential.”
Henry Lucas, Robert H. Smith Chair of Information Systems at Maryland Smith.

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About the Expert(s)

Joseph P. Bailey's research and teaching interests span issues in telecommunications, economics, and public policy with an emphasis on the economics of the Internet. This area includes an identification of the existing public policies, technologies, and market opportunities that promote the benefits of interoperability. Bailey is currently studying issues related to the economics of electronic commerce and how the Internet changes competition and supply chain management.

David Kass

Dr. David Kass has published articles in corporate finance, industrial organization, and health economics. He currently teaches Advanced Financial Management and Business Finance, and is the Faculty Champion for the Sophomore Finance Fellows. Prior to joining the faculty of the Smith School in 2004, he held senior positions with the Federal Government (Federal Trade Commission, General Accounting Office, Department of Defense, and the Bureau of Economic Analysis). Dr. Kass has recently appeared on Bloomberg TV, CNBC, PBS Nightly Business Report, Maryland Public Television, Business News Network TV (Canada), FOX TV, Bloomberg Radio, Wharton Business Radio, KCBS Radio, American Public Media's Marketplace Radio, and WYPR Radio (Baltimore), and has been quoted on numerous occasions by The Wall Street Journal, Bloomberg News, The New York Times and The Washington Post, where he has primarily discussed Warren Buffett, Berkshire Hathaway, the economy, and the stock market. 

LucasHenry

Professor Henry Lucas' research interests include information technology-enabled transformations of organizations, markets, industries and our daily lives. He has conducted research on the impact of information technology on organizations, IT in organization design, electronic commerce, and the value of information technology. Lucas co-produced and co-wrote The Transformation Age: Surviving a Technology Revolution with Robert X. Cringely, a documentary co-developed by Maryland Public Television and the Smith School shown on public television stations around the U.S. He has authored a dozen books as well as monographs and more than 70 articles in professional periodicals on the impact of technology, information technology in organization design, the return on investments in technology, implementation of information technology, expert systems, decision-making for technology, and information technology and corporate strategy.

RossiCliff

Dr. Clifford Rossi is an Executive-in-Residence and Professor of the Practice at the Robert H. Smith School of Business, University of Maryland. Prior to entering academia, Rossi had nearly 25 years' experience in banking and government, having held senior executive roles in risk management at several of the largest financial services companies. His most recent position was Managing Director and Chief Risk Officer for Citigroup's Consumer Lending Group where he was responsible for overseeing the risk of a $300+B global portfolio of mortgage, home equity, student loans and auto loans with 700 employees under his direction. While there he was intimately involved in Citi's TARP and stress test activities. He also served as Chief Credit Officer at Washington Mutual (WaMu) and as Managing Director and Chief Risk Officer at Countrywide Bank.