Shares of Facebook (FB) +3% are surging ahead of the company's highly anticipated release of a White Paper for its cryptocurrency project tomorrow.
The social media behemoth is expected to unveil plans for a stablecoin called "Libra" that can serve as a currency on Facebook properties and across the internet.
A stablecoin is meant to represent steady value and avoid the volatility notorious with cryptocurrencies.
According to The WSJ, Libra will be backed by a basket of major fiat currencies. Tether (USDT) is a popular crypto stablecoin that is pegged to the US Dollar (USD), but as is often the case in crypto, the coin's collateral and composition have been somewhat controversial.
Last week, The Block reported that a consortium of technology, payments, eCommerce, crypto, and venture capital partners including PayPal, Visa, MasterCard, eBay, Uber, and Andressen Horowitz have all signed on to govern the project, which gives Libra considerable clout.
Large players seemingly had no choice but to sign on because they didn't want to miss out on what could turn out to be the first widely adopted crypto currency. The project, which Facebook has tried to keep secret, is being run by former PayPal President and VP of Facebook Messenger David Marcus.
Last week, RBC was out positive on the stock, noting that the project "may prove to be one of the most important initiatives in the history of the company to unlock new engagement and revenue streams" within Payments, Commerce, and Applications/Gaming.
While peer-to-peer payments is already a competitive space in the US, it has the potential to be a game changer in underbanked emerging markets. There's no doubt that Facebook's unrivaled scale means there is a massive long-term potential. Libra is expected to launch next year.
Investor interest in cryptocurrencies surged in 2017 before the bubble popped in 2018. Crypto assets are faring well this year but consumer adoption of cryto assets in the real world has yet to really play out. Developers in the industry remain as bullish as ever as blockchain technology still has the potential to disrupt nearly every sector of the economy over time.
Facebook continues to grow ancillary businesses and build upon its massive worldwide scale. At the same time, US regulators pose a threat after the House Judiciary Committee announced a bipartisan investigation into competition in digital markets earlier this month. This was a long time coming given the immense power and influence the largest US technology companies garner. The days of Facebook acquiring upstart social networks that pose a threat are likely over. Facebook already has plenty of market power and the regulatory overhang is unlikely to result in action anytime soon.
Facebook will report second quarter results in late July. The company has a ~$535 bln market cap and trades at ~26x EPS estimates for fiscal 2019 or ~20x fiscal 2020 estimates.