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What's Behind Facebook's Digital Currency And Why Spotify Is Interested

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This week, tech giant, Facebook, released a whitepaper – an informational vision document typically reserved for startups, along with an announcement of Libra, a “stable” digital currency the company hopes to bring to life in 2020.

The nonprofit governing body of the digital currency, the Libra Association, includes a diverse bunch of 28 businesses [reported by Frank Chaparro’s The Block] across multilateral organizations, and academic institutions including Andreessen Horowitz, Lyft, Mastercard, PayPal, Uber, VISA, and Spotify – the only music partner at this stage.

With founding members strategically assembled from all sectors – payments, technology and marketplaces, telecommunications, blockchain, nonprofit, and venture capital, each were required to invest at least $10M into operating Libra – a seemingly moderate investment for access to Facebook’s 2.3 billion monthly active users.

“There is an opportunity to better reach Spotify’s total addressable market, eliminate friction and enable payments in mass scale,” Spotify said in blog post announcement about joining The Libra Association.

In an effort to build sustainable and connected relationships with fans, adopting Libra, could potentially introduce Spotify’s service to the more than 1.7 billion adults worldwide without access to mobile money, a bank account, or a payment card that Libra hopes to service.

“One challenge for Spotify and its users around the world has been the lack of easily accessible payment systems – especially for those in financially underserved markets,” explains Alex Norström, Chief Premium Business Officer at Spotify, “this creates an enormous barrier to the bonds we work to foster between creators and their fans.”

With success for Spotify in developing markets like South Asia where smartphones are largely the introduction to screen technology – millions are still limited by devices, data plans, and network conditions – creating barriers to serve up content globally and uniquely tied to location-based variables and infrastructure potholes. In March, Spotify announced its music tech would come preinstalled on Samsung mobile devices – a popular device brand in developing regions. Getting a new Samsung phone could be instantly linked to discovering tens of millions of pieces of audio content on the platform. With recent acquisitions in the podcasting space, Spotify stands to serve more content than ever globally.

In a podcast recorded at the Cannes Lions festival, reported on by Musically, Daniel Ek, Spotify’s CEO, explains a more robust use case for Libra that would allow listeners to pay artists directly. “The most important thing is it will enable paying for things digitally in many of the places around the world where those kind of methods just doesn’t exist – a service like Spotify, you can imagine what would happen by allowing users for instance to be able to pay artists directly.”

The cryptocurrency trend seems it could be entering a less transactional, more committed role as the real-world utility begins to surface. However, the ways in which we understand and assign value to these new paradigms raises a lot of questions – particularly those of trust and security.

With public morale around Facebook far from high – as recent employee NDA’s expose poor working conditions, and criticism circles the company’s motives behind investment in a housing crisis it may have helped create in San Francisco, many have questioned the introduction of a global currency from this organization.

California’s U.S. House Financial Services Committee Chair, Rep. Maxine Waters (D-Calif.), appeared on CNBC two days after Libra was announced to oppose the development, “this is like starting a bank, without having to go through any steps to do it,” she says, “they are creating their own cryptocurrency and they’re going to be located in Switzerland – it’s going to be an alternative to the dollar.”

The world is watching with both England and France entering the discussion on Facebook’s Libra announcement. While France does not oppose Facebook’s decision to create an instrument for financial transactions, it does oppose that instrument become a sovereign currency. Similarly, the Bank of England’s Governor Mark Carney said during a BBC Interview that  Libra is being proposed as a global public good, so it would need to have direct regulatory oversight, not be owned by Facebook or a group of technology companies and would have to largely consider potential risks in data privacy.

“Privacy and security is a myth that people in the U.S. still believe,” says Allyson Toy, a music culture strategist translating and connecting the emerging Chinese music technology industry with U.S. artists and businesses.

As a Chinese American growing up in the Bay Area, California, Allyson moved to Shanghai in 2017 following the meteoric rise in popularity of hip hop, spurred by popular show Rap Of China on China's Netflix equivalent, iQiYi, while keenly observing among other things, how people put trust into technology and government globally.

“The rate of change in China is faster than the U.S. which makes it easier for new technology to spread and adopt more quickly,” Allyson explains, “everyone has also grown up being 'watched' by technology, so things like cashless pay have been accepted and normalized through methods like WeChat and Alipay – everybody uses these.” China’s top social network WeChat serves 1 billion monthly users in China alone, compared to Facebook’s 2 billion globally, and Alipay surpassed PayPal as the world’s largest payment platform in 2013.

“What if everyone was invited to the global economy with access to the same financial opportunities,” a pondering narrator questions in an unlisted Libra sizzle video. “Why can we send memes in an instant but can’t send money?”

Building a stable global currency system, with a diverse consortium, and the distribution backbone of the largest social network in the world may be a step towards utopia, while, the desire for universal access and frictionless value transfer continues to remain central to the advancement of digital currency.

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