Facebook’s Cryptocurrency “Libra” – The announcement comes as Facebook is grappling with public backlash due to a series of scandals, and may face opposition from privacy advocates, consumer groups, regulators and lawmakers.
Facebook’s Cryptocurrency “Libra” plan is taking shape
Will Be Launched In 2020
SAN FRANCISCO/NEW YORK: The world’s biggest social network Facebook’s Launches new Cryptocurrency Libra. And has indicated that it wants to move into the payments industry by launching its own cryptocurrency next year. So what’s behind Facebook’s Cryptocurrency “Libra” not-so-cryptic plan.
Facebook already rules daily communication for more than two billion people around the world. Now it wants its own currency, too.
What is the Plan
Facebook Inc revealed plans on Tuesday to launch a Cryptocurrency “Libra”. The latest development in its effort to expand beyond social networking and move into e-commerce and global payments.
Facebook has linked with 28 partners in a Geneva-based entity called the Libra Association, which will govern its new digital coin set to launch in the first half of 2020. According to marketing materials and interviews with executives.
Also Facebook has also created a subsidiary called Calibra, which will offer digital wallets to save, send and spend Libras. Calibra needed to be connected to Facebook’s messaging platforms Messenger and WhatsApp, which already boast more than a billion users.
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Why would Facebook want to have its own cryptocurrency in the first place?
Boasting more than 2 billion users across its platforms including WhatsApp and Instagram. The world’s largest social network aims to guide cryptocurrencies away from the fringes of the current financial system and into the mainstream.
A virtual currency of its own would enable Facebook users to send funds through the company and would make online purchases with retail websites more efficient by bypassing credit card payments.
The initiative could further facilitate shopping and gaming. “It may prove to be one of the most important moves in the history of the company to unlock new engagement and revenues streams,” says RBC analyst Mark Mahaney.
“Facebook wants to add new revenue streams, but also mine more user data on our behavior to find out what drives us in our purchases online,” Lisk marketing head Thomas Schouten told DW.
What’s in it for Facebook’s users?
For the cryptocurrency to become a success, Facebook certainly needs to make sure that users are happy using it.
One advantage will become obvious right away. The currency used for payments between friends or family members at lower costs than what people would have to pay for conventional transactions. Or Facebook could offer payments at no costs at all in an initial phase.
Avoiding credit card transaction fees would also make it cheaper to pay online merchants, experts believe.
Does the social network have sufficient support for its plan from other market players and regulators?
Facebook has already done quite a bit of preparatory work to eventually make its plan a reality. It set up Libra Networks earlier this year. A financial technology firm based in Switzerland and specializing in investment, payments and block-chain, according to Reuters. Libra could also be the name for the planned currency.
PRIVACY, REGULATORY CONCERNS
Although Libra-backers who spoke to Reuters or provided materials are hopeful about its prospects. Some expressed awareness that consumer privacy concerns or regulatory barriers may prevent the project from succeeding.
Calibra will conduct compliance checks on customers who want to use Libra, using verification and anti-fraud processes that are common among banks, Facebook said.
Transactions will cost individuals less than merchants, Facebook said, though executives declined to provide specifics. Each Libra will be backed by a basket of government-backed assets.
The company plans to refund customers who lose money because of fraud, Facebook said.
Sri Shivananda, Paypal’s chief technology officer said in an interview that the project is still in its “very, very early days,” and there were conversations in progress with regulators.
MasterCard’s Lambert characterized Libra similarly, noting much needed to happen before the launch.
If the project receives too much regulatory pushback, he said, “we might not launch.”
The Wall Street Journal reported that Facebook has secured the support of a dozen companies including Visa, MasterCard, PayPal and Uber, which are willing to invest about $10 million (€ 8.94 million) each.
Cryptocurrencies have experienced a rollercoaster ride in recent years. Does Facebook have a plan to avoid excessive volatility?
Very much so. The consortium is reported to be managed externally. Aware of Facebook’s recent data privacy scandals. It will bend over backward to build trust among consumers. And it will do so mainly by pegging the network’s cryptocurrency to the US dollar or even a basket of currencies including the euro.
That, at least, will see it avoid the huge volatility that the likes of Bitcoin and Ethereum have had to grapple with.
What’s Facebook likely to focus on straight after introducing its own cryptocurrency?
Low volatility is key to appealing to developing countries that have experienced the downsides of unstable local currencies. Bloomberg believes that Facebook might initially set its sights on the remittance business in India, with the nation’s market for payments sent home being among the world’s largest.
Online portal Wired points out that Facebook will obviously need to have access to a secure basket of matching fiat money and/or deposit some of its own reserves in commercial banks.
Bitcoin, the most well-known cryptocurrency, created in 2008. For pseudonymous users to transfer value online through encrypted digital ledgers. Early developers believed that the world needed an alternative to traditional currencies. Not controlled by governments and by central banks.
Since then, thousands of bitcoin alternatives have launched. And Facebook is just one of dozens of blue-chip companies dabbling with the underlying technology. But its status as a Silicon Valley behemoth that touches billions of people around the world has created significant buzz around Libra’s potential.
Partners in the project include household names like Mastercard Inc, Visa Inc, Spotify Technology SA, PayPal Holdings Inc, eBay Inc, Uber Technologies Inc and Vodafone Group Plc, as well as venture capital firms like Andreessen Horowitz.
Will the social network’s move have any impact on virtual currencies that have been around for years?
There’s ample reason to believe that the introduction of a Facebook currency will have a positive impact on other cryptocurrencies such as Bitcoin.
The latter has recently surpassed the $9,000 threshold again, but Facebook could help it move a lot closer to its peak of $20,000 dating from late 2017.
Facebook’s move could certainly help cryptocurrencies become more mainstream.
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