Facebook announced its new cryptocurrency called Libra on Tuesday which is set to launch in the first half of next year. The digital currency powered by blockchain is backed by several companies including Visa, Lyft, eBay, Spotify and many more.
Facebook’s plan is to create a new digital currency and financial system to transform the way money moves around the world, beyond its own apps, while the goal is for developers to create services for consumers to make everyday transactions. Users can also send money around the world easily and more cheaply than traditional wire transfers have allowed.
The Libra currency will not be run by Facebook, per the white paper, but by a nonprofit association supported by a variety of companies and organizations. However, Facebook does have a plan to profit from the coin with a new subsidiary, Calibra, which is building a digital wallet of the same name for storing and exchanging the currency.
“Libra is a major validation of cryptocurrencies and blockchain technology to be the financial infrastructure of the future,” said Garrick Hileman, head of research at Blockchain, which makes a cryptocurrency wallet. Libra “could be one of the most significant and positive events in cryptocurrencies’ history as billions of Facebook users could join the ecosystem we’ve been building over the last decade.”
Nearly 35 million people worldwide now have blockchain “wallets” to hold cryptocurrency, according to a recent report from Statista. By comparison, Facebook’s global user base of roughly 2.4 billion is massive. Many in the blockchain space believe Libra will leverage Facebook’s users to finally emerge crypto into the mainstream.
“Worst case scenario, Facebook crypto could become the gateway drug to introduce people to the greater crypto ecosystem,” said Roneil Rumburg, CEO of Audius, a blockchain-based music streaming service. “Best case, their stablecoin is sufficiently decentralized to enable interesting censorship-resistant use cases and is still usable by a mainstream audience.”
Libra could also be beneficial to users in third-world and developing countries who currently rely on services such as Western Union to send money. Currently Facebook and WhatsApp are huge in developing nations like Africa and India, and by providing users the ability to send funds to one another and to merchants at a low cost, it will “bring billions of people into the modern economy,” said Tony Perkins, editor of Cryptonite, a media company focused on blockchain.
While it’s already possible to transfer money digitally using Venmo or Facebook Messenger’s own peer-to-peer transfer feature, both require a bank account, which many developing countries don’t have access to. Therefore, Facebook is expecting that Libra will seriously take off as it can offer a stable alternative to their local currencies that is easier to store and spend.
“We’ve seen the internet change the game for everything that could be digitized, except for money,” said David Marcus, the leader of Facebook’s Calibra division.
“The numbers really speak for themselves. There are 1.7 billion people around the world that are unbanked, the same number are underserved by financial services,” said Marcus. “Now, anyone with a cheap smartphone has access to all the info they want in the world for free with a basic data plan. Why doesn’t money work the same way?”
The announcement of Libra comes after Facebook faced a slew of privacy issues, sparking concerns about whether people will trust the social platform with their financial information. According to Facebook, Calibra will not share users’ financial data with Facebook except in “limited cases” and will not use it for targeted advertising. In addition, Caliba will be equipped with the same type of verification and anti-fraud processes that banks and credit cards use.