What Libra means for your business

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ibra Blockchain – The Future is Now

The unveiling of Libra stands tall in a line of landmark moments in the tech industry. If you need to further understand the details of what Libra is click here. What does the launching of Libra mean for your business? Why is this important? What are the opportunities and risks? And how should we respond?

Blockchain’s Arrival on Main Street

For the first time, a group of well-respected businesses (including nonprofits) are creating a cryptocurrency together. Libra will not just be Facebook’s coin to use in WhatsApp, Instagram DMs, and Messenger, this will also be Visa’s coin, Mastercard’s coin, PayPal’s coin, Spotify’s coin, Uber’s coin, Lyft’s coin and other big names who will join a list of what will turn into thousands of businesses and organizations.

They are doing this because they believe the digital transfer of value in a direct peer-to-peer and trustless way is transformative in nature. Sending money to a friend or a business will become as frictionless, costless and instantaneous as sending them a picture. While digitalizing photography made the process of capturing a moment on an image easier, it also created an explosion in the number of pictures we collectively create and store, many of which are in an automated way. A very similar trend can be expected for digital money. More (automated) direct and continuous value exchanges ( b-to-b, b-to-c and c-to-c) will unfold.  

Introducing Web 3.0

With the onset of digital photography and video, new business models were created including Snap, Instagram, YouTube, Facebook and others, collectively often referred to as Internet 2.0. Libra is not just an alternative to PayPal; it offers the promise of a foundation for a new open-source financial network.  New business models will be built on top of Libra using Move’s smart contract language. We expect massive experimentation to happen in lending, fundraising and investing, followed by new business models created in consumer, tech, entertainment, education, professional services and healthcare industries.  

For this reason, the onset of blockchain and cryptocurrencies is commonly referred to as the foundational building blocks for “The Internet of Money” or simply “Web 3.0.” The Ethereum network has been the underlying network of preference for many innovation projects in the past years. Having a stable and credible framework, backed by highly reputable businesses, will usher in a new era of innovative new businesses models.

Opening of New and Existing Markets

People in underdeveloped countries around the world who previously did not have access to banking systems (the 1.7 Bn unbanked) were deprived of some of the basic building blocks of economic development; a stable currency, the ability to take out a loan, the ability to safely store value, the ability to account for anything in a transparent and reliable way. Through a smartphone and a handful of apps these foundational blocks are airdropped on over a billion people. This will spur development, creating new markets and ultimately lifting many people out of poverty.   

For first-world markets the widespread deployment and usage of a cryptocurrency will force regulators to remove any remaining uncertainty on legal, tax, audit and accounting rules and guidelines. Countries and consumers benefit from creating transparent and easily navigable frameworks. The US regulatory bodies have been moving down this path already and Libra’s oncoming will accelerate this development.

New Security & Risk Management

Digital money and digital assets benefit from open and transparent ledgers and records. We don’t have to rely on a third-party to execute or review a transaction, we can verify ourselves. Where assets are not digitally captured, we do need the help of an auditor to provide this trust enabling function. Where they are digitally captured is where you will want a trust aggregator to show you things are processed as expected, and more importantly, not as expected. Security and risk monitoring become more necessary in a world where value is exchanged directly and instantly. But not through backward-looking periodic reports. Instead, in real time – independently verified and easily accessible, all through the transparency reliability of blockchain technology.

How to Start

The most glaring opportunity is to begin the process of future-proofing your business to transact in this digital asset world. Setting up your business to transact with cryptocurrencies is in many ways similar to installing a dial-up internet modem in 1992. Its impact was marginal at the time, and yet it is hard to overestimate the importance of doing so decades later.

Digital assets require different payment processes, accounting treatment, tax treatment, custody solutions and controls in place. Early digital asset adopters will have an opportunity to gain momentum over their competitors in capturing a disproportionate share of digital value exchanging hands.

This is an article written by Andries Verschelden a partner from Armanino LLP, an independent firm associated with Moore Stephens International.