The crypto craze is gaining serious momentum.
On Tuesday, social media giant Facebook unveiled plans for a new cryptocurrency called Libra, backed by a host of companies including Visa and PayPal, that would function as a digital payment on its platform. Other project partners include eBay, Uber and Spotify, indicating that Libra may eventually be accepted as payment on their platforms as well.
“This is really the main difference: what Libra is doing is creating a digital version of the U.S. dollar, yen, euro. It’s like a stablecoin, but you still have all the characteristics of a fiat currency, ” Kelly said Tuesday on “Fast Money.” “Bitcoin is … digital gold. And, in my opinion, it’s probably a lot better than gold, but there is no trusted third party involved, and that’s the huge difference.”
With Libra, Facebook users will be able to exchange their dollars for Libra tokens, thus entrusting Facebook and its fellow backers with building a reliable ledger of all transactions, Kelly said.
“You have to trust Facebook that they’re going to hold onto those dollars, they’re going to keep track of the ledger, and that your token’s going to be worth something. You go out, you buy your goods and services on the Facebook platform, whoever else is using it. Maybe Uber somehow is involved. And then you’re left with the Libra tokens that are left over,” he said.
That trust defines the main difference between cryptocurrencies like bitcoin and Libra, Kelly said. Bitcoin buyers don’t need to entrust a third party with their money or information, whereas Libra users will have to trust the company that has perhaps been most plagued by issues around trust and privacy: Facebook.
“This is about that trusted third party and, to me, that’s the revolution of crypto, is that it is peer-to-peer. You disintermediate financial services,” Kelly said. “So, when you talk about the differences between this and something like bitcoin, bitcoin is trustless. You don’t need to believe that anybody’s going to check that ledger; you can do it yourself.”
So, as Libra seeks to provide what Kelly saw as “the next iteration” of platforms like PayPal’s Venmo, it may just open the door for consumers to look into the cryptocurrency market in a more serious way, he said.
“This is a huge step forward. Facebook’s going to have a nice-looking wallet that everybody can get on. It’s easy to use. You can start moving this stuff around,” he said. “This validates the technology and gets people involved. To me, it’s like the AOL moment: AOL got you online, Libra’s going to get you into crypto.”
Facebook shares fell by less than 1% by the end of Wednesday’s trading session amid some political pushback, but are still up more than 3% this week. Bitcoin prices rose by nearly 2% by the end of the day’s trading session and are up 140% for the year to date.