The development of a new blockchain-based, global digital currency spear-headed by Facebook was announced on Tuesday, in a move that has been touted as a potential game-changer for digital payment methods.
Libra, the new digital currency, is being developed by the social media giant, with the support of a number of digital market-places, payments and telecommunications providers including the likes of Mastercard, Visa, Paypal, Vodafone, eBay and Uber. It also includes Naspers’ fintech and e-payments division, PayU.
On Tuesday, Facebook also announced Calibra — the e-wallet it will launch to transact using Libra — which is expected to go live in 2020. Calibra will be available in Facebook Messenger, WhatsApp and as a standalone app.
Facebook’s partners on the project will become the founding members of the Libra Association — a non-profit organisation, registered in Geneva Switzerland, which will be the governing entity that guides the development of the Libra blockchain and the Libra Reserve.
Unlike other digital or cryptocurrencies such as Bitcoin, the Libra is intended to be backed by real assets. These, according to a whitepaper from the association, will include a basket of bank deposits and short-term government securities that will be held for every Libra coin that is created.
The intention of what will be known as the Libra Reserve — is to ensure that the currency will remain stable over time and maintain some store of intrinsic value.
With around 2.3-billion people already using Facebook’s platforms, Libra could potentially overcome the hurdle that many digital, or crypto, currencies face which is wide scale adoption by users.
“Mass-market usage of existing blockchains and cryptocurrencies has been hindered by their volatility and lack of scalability, which have, so far, made them poor stores of value and mediums of exchange,” the white paper said.
“We believe that collaborating and innovating with the financial sector, including regulators and experts across a variety of industries, is the only way to ensure that a sustainable, secure, and trusted framework underpins this new system.”
While Libra is billed as becoming “a simple global currency and financial infrastructure that empowers billions of people” Facebook’s record of overseeing users’ personal data has been called into question. It famously earned the ire of regulators globally after advisory firm Cambridge Analytica, harvested millions of users’ for political purposes.
For the coming year, at least, Facebook will remain a key driver of Libra’s development, according to the white paper.
It notes that Facebook teams “played a key role in the creation of the Libra Association and the Libra Blockchain, working with the other Founding Members,” and that it is expected to maintain a leadership role through 2019.
It notes however that Facebook’s Calibra subsidiary has been created to ensure the separation of social and financial data
“Once the Libra network launches, Facebook, and its affiliates, will have the same commitments, privileges, and financial obligations as any other Founding Member. As one member among many, Facebook’s role in governance of the association will be equal to that of its peers,” the white paper said.