Facebook's Global Libra Cryptocurrency Gains Heavyweight Backers Visa, Mastercard And PayPal
The era of cryptocurrency is not behind us, apparently. One look at Bitcoin's value—it sits at around $9,143 currently—indicates that there is room for at least one type of digital coin, even after the crypto-bubble burst last year in general. It is not just Bitcoin, though. Facebook is making a major move into the cryptocurrency space and has the backing of some major payment firms.
Facebook's new and open-source digital currency is called Libra. It will be managed by Calibra, a newly formed Facebook subsidiary, with the goal of providing financial services all around the globe while leveraging blockchain technology. The first product that Calibra will introduce is a digital wallet for Libra. This will be made available in Messenger, WhatsApp, and as a standalone app.
Why cryptocurrency, and why now? Facebook points out that half of the adults in the world do not have an active bank account, and the numbers get worse when zeroing in on developing countries and women.
"The cost of that exclusion is high—approximately 70 percent of small businesses in developing countries lack access to credit and $25 billion is lost by migrants every year through remittance fees. This is the challenge we’re hoping to address with Calibra, a new digital wallet that you’ll be able to use to save, send and spend Libra," Facebook explains.
Through Libra, users around the world will be able to send digital currency to almost anyone with a smartphone, as easily and instantly as sending a text message, according to Facebook. There will not be any cost for doing so, and over time, Facebook wants to offer additional services, like paying bills with the tap of a button.
This is an ambitious plan for sure. According to multiple reports, Libra has the backing of several payment companies, including Visa, Mastercard, and PayPal, along with companies such as Lyft and Spotify.
There are obviously some concerns with having Facebook run this kind of operation. One is privacy, for which Facebook's track record is less than stellar. Just look at the Cambridge Analytica scandal for a reason why users might be skeptical that Facebook can aptly handle their financial data. As is usually the case, Facebook is saying the right things.
"We’ll also take steps to protect your privacy. Aside from limited cases, Calibra will not share account information or financial data with Facebook or any third party without customer consent. This means Calibra customers’ account information and financial data will not be used to improve ad targeting on the Facebook family of products," Facebook says.
There will be "limited cases" where Facebook will share info on its users, such as when complying with law enforcement and to "provide basic functionality to the people who use Calibra." Whether users trust Facebook in this capacity, time will tell.
The other big concern is volatility. Cryptocurrencies are prone to wild swings in value. According to a report in the Financial Times, Libra will be backed by a pool of currencies and assets from around the world, and will not fluctuate to the extent that digital currencies like Bitcoin have been known to do. It's not clear how Facebook can ensure this, though.
It will be interesting to see how this plays out. Facebook is still in the early stages of developing Calibra, but expects to launch the service in 2020.