A photo illustration of the digital Cryptocurrency, Bitcoin, is seen on September 13 2018 in Hong Kong, Hong Kong. Yu Chun Christopher Wong | S3studio | Getty Images

The digital currency industry is fired up about Facebook's cryptocurrency efforts. Bitcoin bulls say the tech giant's stamp of approval would legitimize the space, make it easier to buy other digital assets, and spark major financial institutions to get out of "wait and see" mode. "Facebook's efforts in the space has the potential to be one of, if not the most significant external catalysts for bitcoin and crypto adoption in the technology's history," said Spencer Bogart, general partner at San Francisco-based investment firm Blockchain Capital.

Several news outlets including Bloomberg and the Wall Street Journal have reported that the company has been building its own digital currency for users to trade and spend through Facebook Messenger and WhatsApp. Some reports say Facebook is set to announce its plans this week, helping bitcoin rally above $9,000 to more than a one-year high. Facebook shares also jumped more than 3 percent Monday ahead of the expected announcement. The social network hired former PayPal executive David Marcus to begin exploring opportunities with blockchain, the technology behind bitcoin and other cryptocurrencies. As it approaches a public release, there are now more than 100 people working on the project, according to information on LinkedIn, and Facebook is still expanding the team. The Information reported that Facebook is also planning physical, ATM-like machines where users can buy the currency and that company employees will be able to collect salary in the form of new currency.

Lowering the barrier

One side effect of Facebook's entrance to the market would be an easier entry point for the average person to buy cryptocurrencies. Right now, bitcoin and others can be bought on exchanges like Coinbase or Gemini, or through some consumer finance apps like Square Cash and Robinhood. One of the biggest friction points is transitioning from dollars, or another global currency, to digital assets. But once someone is on-boarded to the world of digital assets, there's comparatively less hassle in moving from one asset like Facebook's, to another, like bitcoin, Blockchain Capital's Spencer Bogart said. "Given Facebook's distribution, the seriousness of their crypto effort, and the caliber of the partners they're working with, they have a significant chance of onboarding much of the world to digital assets," he told CNBC. Barry Silbert, an early bitcoin backer and founder and CEO Digital Currency Group, said the launch of Facebook's cryptocurrency "will go down in history as THE catalyst that propelled digital assets (including bitcoin) to mass global consumer adoption" and will be remembered as "just as important -- and transformative -- as the launch of the Netscape browser." TWEET

Legitimizing crypto

Bitcoin itself was formed as a way to bypass traditional financial rails. It first made international headlines after Tokyo-based bitcoin exchange Mt. Gox experienced a series of hacks and was later effectively frozen out of the U.S. banking system for regulatory issues and by 2013 shut down and filed for bankruptcy protection. Dark web marketplace Silk Road used bitcoin to facilitate transactions for guns, drugs and other illicit goods and was shut down in 2015. Bitcoin became known as the currency of choice for criminals, which is still how it's categorized by some who question its use in modern finance. "Early bitcoin and crypto people are viewed as anarchists — many are anti government anti establishment with anti bank rhetoric — that's why the big financial institutions have been wary of investing and supporting cryptocurrency," said Jimmy Nguyen, president of the Bitcoin Association. "When you have a big list of institutional players come in, it does provide more legitimacy to this industry." The first and most famous digital currency sparked mania among retail investors last year and brought it into mainstream finance. Bitcoin hit a high of nearly $20,000 at the end of 2017. Michael Moro, CEO of Genesis Global Trading, said the concept of cryptocurrency became increasingly normalized as that pool of traders grew. Investors are mostly past that "mental hurdle" and see bitcoin as less esoteric and less strange, he said.

"I think Facebook coming out with their own coin would make digital currency more familiar to people," Moro told CNBC in a phone interview. Another question for both bitcoin investors and skeptics was its eventual mainstream use case. Bitcoin was founded as a peer-to-peer payment but has largely taken form as a store of value, or "digital gold" instead. In that sense, Moro said Facebook's cryptocurrency and bitcoin wouldn't compete, and "serve two different purposes." "People have always questioned how mainstream adoption of something like this might come about. Having the retail base that Facebook has certainly helps that," Moro said. "It's bullish for cashless society in general." Nicholas Colas, co-founder of DataTrek research also said the move legitimizes bitcoin. And for every company that's not a part of Facebook's so-called Libra project, "there are thousands who are not." "What technology will they use? Bitcoin is one answer," Colas said. "The fact that Facebook et al even want to build a crypto currency validates the idea of a decentralized currency/payment system."

Infrastructure

Others see this move as motivation for financial institutions to build the necessary rails to support crypto adoption. Fidelity was one of the early entrants by providing custody and trade execution on multiple exchanges for investors such as hedge funds and family offices with a new company called Fidelity Digital Asset Services. "With Facebook and its partners making a concerted push into the space, these financial institutions and payments providers can no longer afford to take a wait-and-see approach, they need to prioritize the buildout of supporting infrastructure now," Blockchain Capital's Bogart said. Part of the risk in cryptocurrency investing is how to prevent them from being hacked. Experts say that has largely barred institutions from embracing these digital assets. Facebook's crypto effort may end up "catalyzing" the build-out of infrastructure like wallets, custody and compliance among large financial institutions and payments providers, Bogart said.

Regulatory hurdles