With over 2 billion people using Facebook, Libra is being promoted by the social network platform as a means to connect people who do not have access to traditional banking platforms.
According to analysts, Libra could be a huge money maker for Facebook especially at a time when the growth of the platform is slowing.
Technology to make transactions with Libra will be available as a standalone app – as well as being available on WhatsApp and Facebook Messenger platforms – as early as next year. Consumers will then be able to send money to each other as well as pay for goods and services using the Facebook-backed digital currency.
The announcement, however, has raised concerns and the move is already attracting scrutiny from financial regulators and privacy advocates across the world. Both US and UK officials have already expressed concern about Facebook’s move into the financial sector.
While Facebook created the currency, decisions regarding the ongoing maintenance of the platform will be carried out by the Libra Association, a collective of financial, not-for-profit companies, and commerce firms.
To join the Facebook subsidiary, each of these companies has had to contribute a minimum of $10m, giving the company more than $1bn to put towards the new currency.
Companies involved include Mastercard, PayPal, the crypto exchange Coinbase, and eBay. Also joining are Uber and Lyft and non-profit financial organisations Women’s World Banking, micro-loan platform Kiva, and the humanitarian aid group Mercy Corps.
Unlike bitcoin and other cryptocurrencies, Libra is tied to a mix of global assets to prevent the volatility that has been common in the digital currency space. Facebook built the currency on its own blockchain technology – the encrypted technology used by bitcoin and other cryptocurrencies – in order to scale to more users more quickly.
Traditionally with cryptocurrency, the network can be run and secured by anyone with a computer access. However, Libra’s blockchain will be closed, initially, and only a select number of people will be able to run the software that powers it and verify transactions.
