It’s been nigh-on impossible to avoid talk of Facebook’s Libra. In the months since it was first announced, the ambitious stablecoin project has been the buzz of the crypto scene. It’s also kept regulators and central banks around the world busy, with many quick to voice criticisms of the proposals. Now, one firm is offering up the chance to bet on Libra futures, meaning, whether Libra will launch next year as intended.
For the most part, regulators are concerned about the challenge a Facebook currency could pose to the global financial order. 2.41 billion monthly active users could potentially switch their online payments to Libra. Therefore, this is rightly a concern for those trying to preserve the fiat financial system.
For Facebook, it’s been one crisis to another since the project was announced. From regulators in the EU flat out rejecting the idea, to lawmakers in the US writing to companies involved with the project to urge them to reconsider, Facebook has had its work cut out.
The original timescale for launch is set at “some time early in 2020”. Facebook still plans to launch the cryptocurrency on a near-universal scale. It also intends to negotiate with individual regulators worldwide to navigate through the minefield of compliance.
Futures exchange CoinFLEX has just launched a new derivative that allows traders to speculate on the eventual go-live date for the Libra project. In what it has called an “Initial Futures Offering”, or IFO, the exchange will allow traders to cash in on delivery before December 30 2020, should Libra go live.
It’s an interesting proposition. For those that have faith in Facebook and the Libra Association’s mission, it could represent the ideal option for backing their delivery timetable. But how realistic is it that Facebook will deliver the goods on time?
Libra Futures: Are They Likely To Pay Out?
Each futures contract has a price of $0.30. This means the exchange says is representative of a 30% chance of launching on time under current circumstances. The future is settled in physical delivery of Libra tokens on the settlement date. These tokens have a value of $1.00 each. So the opportunity for a healthy reward is there for those that regard the timescales set by the Libra Association as doable.
However, just this past week, a difficult set of circumstances for Facebook has become even more challenging. PayPal, one of several key backers of the project, withdrew their support for the Libra Association. PayPal has ongoing concerns about the development of the project. It was also unveiled this week that Libra’s head of product had resigned. This is just five months after being appointed to the post. The bad news was compounded by a letter from two US lawmakers to Visa, Mastercard and Stripe. The letter asked them to reconsider their involvement in the project on the grounds of its potential impact on their business, consumers and the wider financial system. And that’s just this week.
The truth is that Facebook continues to face a gargantuan battle to launch Libra at all. Let alone, on the timescales presented.
CoinFLEX CEO Mark Lamb said the sheer scale of Facebook’s ambitions for Libra make it a tough sell to regulators worldwide. This introduces significant uncertainty to predict as to when the project will deliver.
“Facebook has the ability to rival the entire global banking system from day one, but, because of that fact, when that first day will be is far from certain. The political backlash has been brutal, and it’s anyone’s guess if Facebook will get this over the line.”
Worth The Risk?
It ultimately depends on how you assess the 30% likelihood of on-time launch set by CoinFLEX. Ultimately, there are no guarantees the project will deliver at all. Facebook is already quietly shifting discussions to “later in 2020”. So, there are already signs that another delay could be on the cards.
While it still feels like there’s work to do to get Libra anywhere near ready for launch, the payoff for those backing it early with the new CoinFLEX futures could be significant.
Regulators, at least in some parts of the world, are vociferously against the plans. Therefore, it would take a strong stomach to go in heavily behind a 2020 launch. This is regardless of what Zuckerberg says publicly.