- Facebook has officially announced a new digital currency called Libra.
- It’s built with blockchain technology and governed by a consortium of big companies including MasterCard, Visa, Uber, and Spotify.
- The buzzy but secretive project has been in the works for more than a year, and comes as Facebook faces numerous scandals around data privacy.
- Libra is aimed at providing financial services to billions of people around the world, especially those who don’t have access to banking.
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Facebook is teaming up with an array of heavyweight multinational companies to launch a new digital currency called Libra in an ambitious push to provide financial services to billions of “unbanked” people worldwide.
On Tuesday, the Silicon Valley social-networking giant officially announced what its buzzy and secretive blockchain team has been working on for the past year or so: A new cryptocurrency that aims to provide fast, cheap, and secure online payments by smartphone, sidestepping the traditional financial system.
The project represents a striking push from Facebook into a radically new and reputationally risky industry, even as the company continues to suffer under the weight of two years of scandals, including multiple privacy crises and its implication in the spread of hate speech that fuelled genocide in Myanmar.
More than two dozen companies have been enlisted to invest $US10 million apiece toward the currency’s upkeep in return for a vote in its governance through a not-for-profit foundation called the Libra Association. These range from payment firms like Mastercard and PayPal to tech firms like Ebay,Uber, and Spotify, as well as venture-capital firms, blockchain companies, and nonprofit groups.
There have been numerous leaks in the media about Libra over the past few months, and while it is being formally unveiled on Tuesday, it won’t be available for most users until 2020. Instead, the group is releasing a white paper to outline its aims, introduce developers to the technology early, and try to entice new companies to join the association, which wants to be 100 members strong by the time of the actual launch.
Libra will be “a stable currency built on a secure and stable open-source blockchain, backed by a reserve of real assets, and governed by an independent association,” its white paper reads. “Our hope is to create more access to better, cheaper, and open financial services – no matter who you are, where you live, what you do, or how much you have.”
Facebook’s role risks spooking privacy-conscious users
In addition to kicking off the development of Libra, Facebook is building its own app to sit on top of it, called Calibra.
Facebook says Calibra will be a mobile app that lets users send and receive the digital currency and will exist as standalone iOS and Android apps as well as parts of WhatsApp and Messenger, the company’s messaging apps. (It’s also the name of a new corporate subsidiary that sits under the Facebook umbrella.)
While it will be responsible for Calibra’s upkeep, Facebook says it won’t have any more influence over Libra itself than any of the other members of the association, and it won’t use transaction data from the digital currency to profile users and target them with advertising. Facebook engineers have been responsible for developing the software so far, though it is open source, meaning anyone can (in theory) contribute.
Facebook’s battered reputation around issues of privacy and data security might make some users hesitant to adopt Libra. In an interview with Business Insider, Kevin Weil, Facebook’s VP of blockchain product, said that convincing some users will “take time, no question about it, and it will be much more actions than words,” pointing to the data separation policy as an example of this.
Facebook’s lack of overall control over the project may also assuage potential users’ concerns – as well as those of regulators and lawmakers, who have viewed the social network (and other tech firms) with increasing scrutiny over the last year.
Providing financial infrastructure for billions of people
“Libra’s mission is to enable a simple global currency and financial infrastructure that empowers billions of people,” Dante Disparte, head of policy and communications at the Libra Association, said in an interview.
In practice, that means a digital currency that will be available to use via a smartphone app to make easy payments and send cash across borders without the kind of fees that the financial industry is notorious for.
Initially, the focus seems to be squarely on people who are “unbanked,” without access to financial services – of which there are 1.7 billion people across the globe, according to the World Bank. Facebook says it isn’t trying to make a profit off the project for now, but that introducing new people to digital finance could encourage them to create Facebook pages or buy ads on the social network, indirectly boosting the company’s finances.
Down the line, Weil said, Facebook is considering building more sophisticated financial products like credit that it could make a profit off of.
As well as peer-to-peer payments, Libra will also be used to make online purchases, and Weil suggested partners like Uber might pass on savings from the digital currency’s lower transaction fees onto users – making it cheaper to use Libra to pay for things than traditional payment methods.
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