Facebook, the biggest social network worldwide with 2.38 Billion monthly active users in just the first quarter of 2019, has finally entered into the crypto space with the announcement of its ambitious new cryptocurrency, called “Libra”.
With 28 founding members including Visa, Mastercard, PayPal, Uber, Lyft, Coinbase and others, Libra’s goal is to bank the 1.7 Billion global unbanked citizens.
Is Libra Really a Cryptocurrency?
Facebook released Libra’s whitepaper on June 18, 2019, detailing the future plans for the Libra project. Libra is intended as a stable coin, backed by a basket of fiat currencies or digital reserve currencies. Unlike Bitcoin, Libra doesn’t feature mining; meaning there’ll be no mining for Libra.
With this new crypto token, Facebook aims to position Libra as a new global currency standard, and is slated for launch in the second half of 2020.
According to the whitepaper, Libra will be developed on its own blockchain called Libra blockchain and the coin will be stored in its own wallet called Calibra. There will also be a Libra Association, an independent non-profit organization which will be governed by multiple private players.
This non-profit organization will decide on the final design of the Libra and they’ll look out for banks that agree to hold the money used to back up the currency. The company that desires to accept Libra must have its digital wallet setup and has to be approved by the Libra association.
Users who want to hold or pay with Libra can do so by using the messaging app — Whatsapp, Messenger, and Facebook’s own stand-alone app. This works with Facebook’s digital wallet “Calibra” which will be integrated with Whatsapp and Messenger to govern the transaction and financial history of the users. Any Facebook user can set up a Libra wallet by verifying their identity using government documents– very similar to Paytm or Paypal. A user’s bank account will be directly linked to Calibra and whenever users want to spend Libra, they simply use the QR code or send a message adding the respective amount, thereby completing the transaction. Merchants will then receive the user’s payments in their Calibra wallet.
Facebook also intends to expand Libra’s use-case in the payments domain, for example, for payment of services like advertisements by any of their 60 Million active business partners, or as a near-free, instant remittance solution by anyone across the world.
Additionally, Facebook aims to expand the use-case of Libra for payment of services like advertisements on Facebook in the near future. The currency is intended to be remitted to anyone, anywhere across the world instantly with almost no fees.
Isn’t it a Decentralized Currency? Who Governs Libra?
The social media giant is launching this cryptocurrency with private market players from diverse industries — including payment, technology, online marketplaces, venture capital, and nonprofits as its founding members.
Facebook has on-boarded 28 partners for Libra, including VISA, Uber, Mastercard, Andreessen Horowitz, PayPal, eBay, Spotify, Vodafone, Xapo, Coinbase, Women’s World Banking and more. Moreover, Facebook is aiming to have up to 100 founding members/partners by the upcoming year.
David Marcus, Libra’s Project Lead and CEO of Libra’s Calibra Wallet has clarified that Libra is not as open as Bitcoin. Bitcoin is decentralized and built on open/permissionless blockchain technology whereas Libra will be built on its own permissioned blockchain, and users would need permission to enter into the blockchain network. However, Marcus clarified that Libra will eventually transition to a permissionless blockchain in the near future.
Are Global Regulators Approving Libra?
When it comes to cryptocurrency, criticisms, and debate abound. Since the launch announcement of Libra, Facebook has faced considerable opposition from global regulators and financial leaders.
The US Congressional Committee, a major regulator who has expressed skepticism about Libra has recently sent a letter to Facebook CEO, Calibra CEO and Facebook COO to halt the development of Libra until further hearings. Facebook’s officials are positively responding to the regulator’s queries on the use cases of Libra. In fact, they are seeking to collaborate with global financial institutions and policymakers.
The co-founder of EthHub, Anthony Sassano points out in his tweet that a government-issued ID needs to be mandatory to sign up for Calibra in order to ensure that the cryptocurrency “comply with laws and prevent fraud”.
Binance founder and CEO, Changpeng Zhao is of the view that after the launch of Libra, Facebook’s access won’t be limited to its user names, Identifications, addresses, phone numbers, family members, friends, and real-time and historic locations. It will also extend to their financial data through Calibra.
Even Donald Trump, President of the United States, expressed his concerns on Facebook’s ambition of becoming a global bank.
Ahead of Libra launch, the social media giant is actively responding to negative remarks and stating that it is looking forward to discussions on any point that has ruffled the feathers of regulators/fintech players.
Libra, Calibra and Libra Association has become quite a hot topic in the current crypto scene. Although the launch is not scheduled for anytime soon, Facebook is all set to rule the global financial system with its Libra currency.
We are still in anticipation to see how the world would react when Facebook actually makes Libra available to people almost anywhere in the world.