Posted On 27 Jul 2019
Facebook has been indicating for some time that it was interested in branching out into cryptocurrencies. Mark Zuckerberg informed the F8 developers’ conference in May that he thought transferring money should be as easy as transferring an image, and that it should be secure, instant, digital, and free of charge.
Facebook has now revealed Libra, its long-awaited entry into the digital currency market. Alongside the currency, Facebook has created the Libra Association, an independent entity for management of the new currency, as well as Calibra, a new subsidiary that will provide financial services for the Libra network.
With 2.4 billion users worldwide, it is predicted that the new Facebook currency could drive cryptocurrencies into mainstream. However, Facebook is currently under massive pressure from politicians and regulators to prove that it does not have an undue influence in its field and that it is not mishandling data.
Facebook has also announced a trial run for its blockchain, the technology that is the foundation of cryptocurrencies. The blockchain is open source, so developers can create applications and provide feedback on the code. Libra proper will be launched in 2020.
Part of the aim of Libra will be to provide reliable financial services and stability to 1.7 billion global citizens who can’t access them at present. The Libra Association has been formed, based in Geneva, with 28 founding members, both nonprofits and companies, because Facebook wants Libra to be seen as a public service, not just a Facebook entity. Each member, including MasterCard and Uber, has an equal vote.
Libra will not be solely confined to Facebook. Using Calibra, money can be sent and purchases made through Facebook, Instagram, WhatsApp and Messenger at the push of a button. However, other entities such as banks and stores will be free to build their own versions using Libra. One of the main problems facing widespread adoption will be persuading retailers and banks to handle the currency; users will most likely tire of it if they are continually having to switch funds between Libra and conventional currencies.
One point in Libra’s favor is that it will be backed dollar for dollar by hard currency and government securities, meaning that it won’t fluctuate as Bitcoin and other cryptocurrencies have done. This gives Libra a level of security not even most banks have, and it is hoped this will overcome initial fears regarding adoption.