Facebook unveiled plans Tuesday for a new global
cryptocurrency called Libra, pledging to deliver a stable virtual money that
lives on smartphones and brings over a billion "unbanked" people into
the financial system.
The Libra coin plan, backed by financial and nonprofit
partners, represents an ambitious new initiative for the world's biggest social
network with the potential to bring crypto-money out of the shadows and into
the mainstream.
Facebook and some two dozen partners released a prototype
of Libra as an open source code for developers interested in weaving it into
apps, services or businesses ahead of a rollout as global digital money next
year.
The nonprofit Libra Association based in Geneva will
oversee the blockchain-based coin, maintaining a real-world asset reserve to
keep its value stable.
The initiative has the potential to allow more than a
billion "unbanked" people around the world access to online commerce
and financial services at minimal cost, said Libra Association head of policy
and communications Dante Disparte.
"We believe if you give people access to money and
opportunity at the lowest cost, the way the internet itself did in the past
with information, you can create a lot more stability than we have had up until
now," Disparte told AFP.
Facebook will be just one voice among many in the
association, but is separately building a digital wallet called Calibra.
"We view this as a complement to Facebook's mission
to connect people wherever they are; that includes allowing them to exchange
value," Calibra vice president of operations Tomer Barel told AFP.
"Many people who use Facebook are in countries where
there are barriers to banking or credit."
But the move raised questions about how such a new money
would be regulated.
French Finance Minister Bruno Le Maire said such digital
money could never replace sovereign currencies.
"The aspect of sovereignty must stay in the hands of
states and not private companies which respond to private interests," Le
Maire told Europe 1 radio.
Bank of England Governor Mark Carney said Facebook's new
currency would have to withstand scrutiny of its operational resilience and not
allow itself to be used for money laundering or terror financing.
ING economists Teunis Brosens and Carlo Cocuzzo said in a
research note it's not clear what Libra is or how it may be overseen.
"Given that Libra is not denominated in domestic
currency, but reflects a currency basket, it is probably more like
security," they wrote.
"This takes us right back to the discussion that has
been haunting cryptocurrency for years: is it a security or something
else?"
Backed by real cash
Libra Association debuted with 28 members including
Mastercard, Visa, Stripe, Kiva, PayPal, Lyft, Uber and Women's World Banking.
Calibra is being built into Facebook's Messenger and
WhatsApp with a goal of letting users send Libra as easily as they might fire
off a text message.
Libra learned from the many other cryptocurrencies that
have preceded it such as bitcoin and is designed to avoid the roller-coaster
valuations that have attracted speculation and caused ruin.
Real-world currency will go into a reserve backing the
digital money, the value of which will mirror stable currencies such as the US
dollar and the euro, according to its creators.
"It is backed by a reserve of assets that ensures
utility and low volatility," Tomer said.
The Libra Association will be the only entity able to
"mint or burn" the digital currency, maintaining supply in tune with
demand and assets in reserve, according to Barel.
"It is not about trusting Facebook, it is
effectively trust in the association's founding organizations that this is
independent and democratic," Disparte said.
New directions
The launch comes with Facebook seeking to move past a series
of lapses on privacy and data protection which have tarnished its image and
sparked scrutiny from regulators around the world.
Chief executive Mark Zuckerberg has promised a new
direction for Facebook built around smaller groups, private messaging and
payments.
The new Calibra digital wallet promises to eventually
give Facebook opportunities to build financial services into its offerings,
offer to expand its own commerce and let more small businesses buy ads at the
social network.
"We certainly see long-term value for
Facebook," Barel said.
Facebook said it will not make any money through Libra or
Calibra but that it is seeking to "drive adoption and scale" before
exploring ways to monetize the new system.
Financial information at Calibra will be kept strictly
separate from social data at Facebook and won't be used to target ads, Calibra
vice president of product Kevin Weil told AFP.
Libra will be a regulated currency, subject to local laws
in markets regarding fraud, guarding against money laundering and more,
according to Weil.
'Watershed' moment?
According to Facebook and its partners, local currencies
and Libra may be swapped at currency exchange houses or other businesses.
And the ubiquity of smartphones means digital wallets for
Libra could make banking and credit card services and e-commerce available in
places where they don't now exist.
Analyst and cryptocurrency investor Lou Kerner said
Facebook's move has the potential to open the door for cryptocurrency to a
wider public.
"What Facebook is really good at, is making things
really simple to use," Kerner told AFP.
"And that's what is super exciting for the crypto
industry, is somebody comes along who understands user experience and has
billions of users that they can roll this out to."
