Facebook unveiled plans Tuesday for a new global cryptocurrency called Libra, pledging to deliver a stable virtual money that lives on smartphones and brings over a billion “unbanked” people into the financial system.
The Libra coin plan, backed by financial and nonprofit partners, represents an ambitious new initiative for the world’s biggest social network with the potential to bring crypto-money out of the shadows and into the mainstream.
Facebook and some two dozen partners released a prototype of Libra as an open source code for developers interested in weaving it into apps, services or businesses ahead of a rollout as global digital money next year.
The nonprofit Libra Association based in Geneva will oversee the blockchain-based coin, maintaining a real-world asset reserve to keep its value stable.
The initiative has the potential to allow more than a billion “unbanked” people around the world access to online commerce and financial services at minimal cost, said Libra Association head of policy and communications Dante Disparte.
“We believe if you give people access to money and opportunity at the lowest cost, the way the internet itself did in the past with information, you can create a lot more stability than we have had up until now,” Disparte told AFP.
Facebook will be just one voice among many in the association, but is separately building a digital wallet called Calibra.
“We view this as a complement to Facebook’s mission to connect people wherever they are; that includes allowing them to exchange value,” Calibra vice president of operations Tomer Barel told AFP.
“Many people who use Facebook are in countries where there are barriers to banking or credit.”
But the move raised questions about how such a new money would be regulated.
French Finance Minister Bruno Le Maire said such digital money could never replace sovereign currencies.
“The aspect of sovereignty must stay in the hands of states and not private companies which respond to private interests,” Le Maire told Europe 1 radio.
Bank of England Governor Mark Carney said Facebook’s new currency would have to withstand scrutiny of its operational resilience and not allow itself to be used for money laundering or terror financing.
ING economists Teunis Brosens and Carlo Cocuzzo said in a research note it’s not clear what Libra is or how it may be overseen.
“Given that Libra is not denominated in domestic currency, but reflects a currency basket, it is probably more like security,” they wrote.
“This takes us right back to the discussion that has been haunting cryptocurrency for years: is it a security or something else?”
Backed by real cash
Libra Association debuted with 28 members including Mastercard, Visa, Stripe, Kiva, PayPal, Lyft, Uber and Women’s World Banking.