Why Facebook's Cryptocurrency Failed
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According to a recent exclusive report by the Wall Street Journal, Facebook is ending its cryptocurrency project. The report revealed that the company was selling the project’s assets, including the payment network and other technology to a California bank for $200 million. Facebook revealed its ambitious crypto project in 2019. However, those dreams appear to have been shuttered for now. So what happened?

Why The Facebook Crypto Project Failed

The Facebook crypto project has failed in less than three years. It was an ambitious plan that would have seen the company create a payment system independent of the regular financial system. However, this is not the first major project that the company has abandoned. Most notable in its failed projects list is the failed smartphone project by the company around 2011. However, this time, the project’s failure cannot be blamed on a lack of interest by the masses. For instance, one study by Pew Research found that crypto was becoming more mainstream. The study found that around 16% of Americans have interacted with crypto

Some Of The Reasons Why It Failed Are:

Regulatory Pressure

From the onset, regulators in Washington were not on board with the project. They feared that Facebook could essentially take over the financial system, given its two billion strong global user base. Additionally, there were concerns regarding the handling of financial data, since the company was facing accusations of mishandling user data at the time.

The failure of the company to bring a project in the highly regulated financial sector is the first time Facebook has folded a project due to regulatory pressure. Some experts believe that the decision could also cause complications in its attempt to launch the metaverse.

Internal Strife

Another reason why the project failed appears to have been internal disagreements regarding the project. When Facebook’s initial project faced regulatory scrutiny, the company attempted to remake the project and formed the Libra Association. Essentially, it ensured that the company was not directly under the management of Facebook.

At the time, Facebook’s VP David Marcus, and the former president of PayPal, went to Washington to try and pitch the redesigned project to Congress. However, that ended disastrously and the VP announced he was resigning from the company in November 2019.

What It Means For The Future

Shortly after Facebook announced its plan, China took a big leap forward and announced it planned to launch a digital currency. Since then, many other central banks around the world have begun trials of their CBDCs. What is interesting to note is that Facebook’s project did not break any existing laws. However, regulators still managed to exert enough pressure on the project that it failed.

For cryptocurrencies, this does not board well for the future. One reason why regulators reacted so strongly to the project was the size and influence of Facebook globally. It means that if cryptocurrencies such as Bitcoin even become a real threat to the mainstream financial system, regulators will not hesitate to react. It can thus be concluded that the only reason why regulators have not taken sterner action against the crypto sector is that it is relatively small.

For Facebook, this does not bode well for future projects. Some experts have compared the situation to the Microsoft vs. Google rivalry a few years back. While Microsoft at the time no doubt saw that the future was in search, they were not able to act in time. A major reason for this is that it was facing a major antitrust lawsuit. Today, there are many proponents of tougher antitrust policing of companies like Facebook. Consequently, the company would be forced to abandon any future developments, allowing new companies the opportunity to expand and grow.

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