After months of rumors about Facebook developing a cryptocurrency of its own, the social media megacorp yesterday unveiled its ambitions for what it calls the Libra project. With more than two dozen blue-chip and upstart partners such as Visa, PayPal, Mastercard, Uber, Thrive Capital and Spotify already buying in, Libra will -- if all goes smoothly enough -- launch next year.
“Facebook’s goal is for Libra to become a ubiquitous medium of exchange across Facebook apps such as WhatsApp and Instagram as well as across the broader internet. Based on blockchain technology, a digital record of activity distributed across a wide network of computers, it enables the secure and rapid transfer of ‘coins’ from user to user, replacing the transaction services currently offered by banks in the process,” writes Sam Dean for the Los Angeles Times.
“Once people buy a chunk of Libra using their country’s currency, the thinking goes, they’ll be able to do business with just a smartphone, no credit card or bank account necessary,” Dean adds.
As did Bitcoin’s pseudonymous creator, Satoshi Nakamoto, Facebook released a white paper to explain the details of Libra.
“It doesn’t see the cryptocurrency as an attempt to replace the current financial system, as is Bitcoin’s aim. Rather, it’s intended to extend a digital payment method to under-served populations that don’t currently have easy access to traditional financial institutions,” writes CNBC’s Alicia Adamczyk.
“The company also announced a new digital wallet called Calibra, which will be operated by Facebook as a separate subsidiary and provide users with a way to store and spend Libra. The digital wallet, which won’t be available to the public for months, will display the value of users’ Libra in their local currency and provide a design similar to popular digital wallet Venmo for transferring money,” Jeff John Roberts reports for Fortune.
And "one of the initiative’s main goals is to reach the 1.7 billion people worldwide who lack access to the banking system,” Roberts adds.
“It’s an anomaly that the Internet has no protocol for money,” David Marcus, a former PayPal executive who is leading Libra for Facebook, tells Roberts, saying also that it will provide more competition in financial services.
“The effort … could face immediate skepticism from people who question the usefulness of cryptocurrencies and others who are wary of the power already accumulated by the social media company,” write Mike Isaac and Nathaniel Popper for New York Times.
“But if the project, which Facebook hopes to begin next year with 100 partners, should come together, it would be the most far-reaching attempt by a mainstream company to jump into the world of cryptocurrencies, which is best known for speculative investments through digital tokens like Bitcoin and outside-the-law ecommerce, like buying drugs online,” they observe.
“The currency will be serviced by a collective of companies called the ‘Libra Association.’ It functions as what is known as a ‘stablecoin,’ pegged to existing assets like the dollar or euro, in the aim of making it less subject to the volatility that many cryptocurrencies experience,” reports Kari Paul for The Guardian.
“Facebook claims that although it created the Libra Association and the Libra Blockchain, once the currency is launched in 2020 the company will withdraw from a leadership role and all members of the association will have equal votes in governance of Libra,” Paul continues, reporting that each entityhas contributed a minimum of $10 million to be listed as a founding member.
“Early reactions from bank analysts covering Facebook were enthusiastic, in part because the Libra project would help the company move away from a near-complete reliance on targeted advertising. Though highly successful, that business model has drawn criticism for Facebook’s privacy practices and its handling of misinformation on public platforms. The company is shifting toward more private communications, and payments could provide a way to make money in those channels, though Facebook didn’t specify how it expects to generate revenue from Libra,” Jeff Horwitz and Parmy Olson report for the Wall Street Journal.
Lawmakers and privacy advocates were not as enthusiastic about Libra, however.
“Representative Maxine Waters, chairwoman of the U.S. House Financial Services Committee, called for Facebook executives to testify before Congress and asked the company to halt development of Libra until lawmakers and regulators have reviewed the project,” report Reuters’ Katie Paul and Anna Irrera.
“Other regulators, lawmakers and government officials around the globe also quickly issued critical statements. France’s finance minister said he had asked central bank heads from G7 countries to write a report on the project by mid-July,” they continue, adding that a Facebook representative says the company looks forward to answering lawmakers’ questions.
That’s one thing it’s not known for.