Mark Zuckerberg, CEO of Facebook, at the F8 Conference last April. In video, the promotional cylp of Facebook.
Facebook will launch its own currency in 2020: Libra. WhatsApp and Messenger users will be able to exchange money from their digital wallet and Facebook will also offer the service as a separate app.
The presentation document indicates that the main objective of this new currency will be to facilitate the exchange of money in the developing world: “1.7 billion people do not have a bank account, 31% of the world’s population,” says the company on the project presentation website. Libra aspires to reach those users: it would be their account, where they can save, pay and send transfers. About the price of shipments, Facebook only says that it will be “no cost or low cost.”
The company has presented its new currency with a video focused on developing countries, where Manila and Mexico City appear and there is hardly a white person. The launch has been at a time when the United States sleeps, but the rest of the world is awake. It is an obvious message that Facebook’s country of origin is not the priority of Libra, whose legal headquarters will be in Switzerland.
Examples of how the Libra interface will be on mobile. Facebook
Hoping to create a revolution in the financial sector, the company chaired by Mark Zuckerberg says that the time has come for the “Internet of money”, as if it were the next stage after the “Internet of things.” At the latest Facebook developer conference, the company’s founder said “it should be as easy to send money online as it is to send a photo.” This project, which had been rumored for months, is the fulfillment of that wish.
Libra’s hope is to bring together several benefits that together make it dominant: easy to create, fewer commissions, more accessible to people without accounts in traditional banks, and more resilient and expansive thanks to decentralization.
In the presentation of Calibra, which is the name of the Facebook subsidiary company that provides financial services, the company provides an initial document where it establishes the principles that the currency will have: “A low-volatility cryptocurrency, based on decentralized blockchain with the objective of to create a new opportunity for responsible financial services innovation ”.
Facebook has created its blockchain to manage Libra. Blockchain is a system of shared servers maintained by independent groups that certify the transactions that occur on those networks. No one is in full control.
Libra will be supported by a real reserve – the libra reserve – and can be exchanged for other real currencies based on a stable exchange rate. Stability is key to success: users will not spend pound if they believe that the next day it may be worth 10% less.
“To help build confidence in a new currency and achieve greater early adoption, traditionally a country’s banknotes could be exchanged for real resources, such as gold. Instead of supporting the pound with gold, it will be supported by a collection of low-volatility resources, such as bank deposits and short-term government securities of reputable and stable central bank currencies ”. This detail is the one that further distances this new currency from common cryptocurrencies, such as bitcoin, which do not have a reserve behind and their exchange rate varies easily.
Questions with privacy
Data privacy is one of Facebook’s concerns as its currency takes shape: “Apart from limited cases, Calibra will not share financial or account information with Facebook or any third party without the consent of the client.” Calibra will be an independent company from Facebook.
These “limited cases” will include, in addition to fraud prevention and facilitating the operation of the service, an aspect that Calibra calls “global data” and which explains: “Calibra may share global data with Facebook third parties, related to the performance of its products and services. An example would be a graph showing the total number of users of the service. Calibra will use techniques to prevent global data from being linked to a person “.
But as is often the case with terms of service there is always something else: “If any feature of Calibra products can be customized or enhanced with data from Facebook, we will first obtain customer consent to share the relevant data with Calibra.” The request for permits in the past has not exactly been an example of good practice. The example that Facebook gives of what data can be useful is also significant: “People may decide to import their Facebook friends list into Calibra to make it easier to send money. This import will not occur automatically: we will obtain the client’s consent within the product ”.
Libra will be managed by the Libra Association, based in Geneva (Switzerland), which will be made up of Facebook partners in this adventure. The company expects to have up to 100 companies with nodes associated with the project when it is launched on the market in 2020, but at the moment there are already impressive names from various sectors: Mastercard, Paypal, Visa, Booking, eBay, Spotify, Uber, Vodafone, Coinbase, Kiva o Women’s World Banking. Its objective will be “to coordinate and provide a framework for the government of the network and direct the loans of social impact in support of financial inclusion.” When the network is complete, Facebook’s power in the Libra Association will be 1%.
Among the partners at the moment are not the other four big technology companies Apple, Amazon, Microsoft or Google.
Facebook will maintain leadership privileges of the project during 2019, but once it is launched it will be one of its founders: “Facebook, and its affiliated companies, will have the same commitments, privileges and financial obligations as any other founding member. Facebook’s role in the government of the association will be the same as that of its peers. “
Libra has few features that will satisfy regular cryptocurrency users: “Crypto people value the freedom of not needing a bank to operate. Facebook is not the company with the best reputation for that, and even less together with many other companies that will see all the operations of the network, ”says Raúl Marcos, cryptocurrency expert and founder of Carbon.
But it can be “a positive step” for developing markets. The concern now for income with pounds does not seem the priority before the future possibility of becoming the great bank of the people who do not have a bank. “If at the moment the market they are trying to attack is the international money transfer sector like Western Union, they have a lot of room to earn something with commissions,” says Marcos.
The underlying doubts are still in what information this group of companies that control the nodes will know: “This information is very valuable. They may only see that someone named 1x4j has sent money to 34b, but if one of the two makes the transaction from their Facebook, maybe Facebook does know, ”says Marcos. The focus on developing countries – where privacy is not their main concern – may mean that these challenges do not affect the future of Libra as much.
Another of the traditional accusations of cryptocurrencies that Facebook tries to avoid from the beginning is their illegal use: “Calibra will implement an effective program to combat money laundering and terrorist financing,” Facebook says in its list of intentions.