Facebook unveiled an ambitious plan on Tuesday to create a new digital currency called Libra, similar to Bitcoin for global use, one that could drive more e-commerce on its services and boost ads on its platforms.
The social networking giant already rules daily communication for more than two billion people around the world. Now it wants its own currency, too.
But the effort, which Facebook is launching with partners including PayPal, Uber, Spotify, Visa and Mastercard, could also complicate matters for the beleaguered social network.
Creating its own globe-spanning currency — one that could conceivably threaten banks, national currencies and the privacy of users — isn't likely to dampen regulators' interest in Facebook.
Key Facts About Facebook’s Cryptocurrency:
- Libra will be available to users on WhatsApp, Instagram and Messenger
- The digital currency will also be available through a standalone digital wallet app on Android and iOS
- Facebook will not be solely responsible and control the digital currency
- Companies like Uber, Visa, MasterCard and Spotify among others are agreed to join the association called Libra to operate the digital currency
- Facebook claims it will not be able to track or access user data, or any payment done using Libra
- Facebook is entering the financial services sector, claiming to enable over 1.7 billion unbanked users across the globe to become digital supported.
- Unlike a Bitcoin, Facebook highlighted that Libra’s valuation will revolve around the US dollar, yen and the Euro.
Facebook is taking the lead on building Libra and its underlying technology; its more than two dozen partners will help fund, build and govern the system. Facebook hopes to raise as much as $1 billion from existing and future partners to support the effort.
Facebook Relying On Partners for Libra
The digital currency, called Libra, is scheduled to launch sometime in the next six to 12 months.
Company officials emphasized Libra as a way of sending money across borders without incurring significant fees, such as those charged by Western Union and other international money-transfer services.
Libra could also open up online commerce to huge numbers of people around the world who currently don’t have bank accounts or credit cards.
"If you fast forward a number of years, consumers all over the world will have the ability to access the world economy," Facebook executive David Marcus said in an interview with The Associated Press.
Backing by familiar corporations might also make Libra the first Bitcoin-like currency with mass appeal. Bitcoin itself remains shrouded in secrecy and fraud concerns, not to mention wild value fluctuations, making it unappealing for the average shopper.
What Will Libra Offer to Users?
Libra will be different, Facebook says, in part because its value will be pegged to a basket of established currencies such as the U.S. dollar, the euro, the yen and others.
Each purchase of Libra will be backed by a reserve fund of equal value held in real-world currencies to stabilise Libra's value.
Facebook won’t run Libra directly; instead, the company and its partners are forming a nonprofit called the Libra Association, headquartered in Geneva, that will oversee the new currency and its use.
The association will be regulated by Swiss financial authorities, Facebook said.
The company has also created a new subsidiary, Calibra, that is developing a digital wallet to allow people to buy, send and use Libra. Calibra pledges that it won't share transaction data from details of Libra user's financials with Facebook unless compelled to do so in criminal cases.
Libra partners will create incentives to get people and merchants to use the coin. That could range from Uber discounts to a Libra bonus paid when users set up a Calibra wallet, although the companies haven't laid out specifics.
Facebook said that if people use Calibra or similar wallets, their individual transactions won’t be visible on the Libra blockchain.
More than anything else, we’re intrigued to see if Facebook manages to convince the Indian government to let them operate Libra in the country (where it has over a billion users) considering that dealing in cryptocurrency has been banned.
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