Users of WhatsApp and Facebook Messenger will be able to spend the new cryptocurrency on their phones
At the start of 2018, Mark Zuckerberg revealed that his annual “personal challenge” for that year would be to explore and understand cryptocurrency and blockchain technology.
Within six months the Facebook founder had set up a task force dedicated to developing uses for a new cryptocurrency, which could utilise the tech giant’s vast resources and user base to create a global currency.
The culmination was Libra, a brand new cryptocurrency that has the backing of some of the world’s biggest companies and financial institutions, including PayPal, Mastercard and Visa.
Download the new Indpendent Premium app
Sharing the full story, not just the headlines
It holds the potential to disrupt the entire financial industry and offers a multi-billion dollar opportunity for Facebook to further extend its reach.
But can Facebook really create a new global currency that dominates payments in the same way its social network transformed the internet?
Taking on banks, not bitcoin
Despite certain technological similarities with bitcoin, Libra’s ambitions go way beyond the cryptocurrency space.
Its creators hope the reach of Facebook and its apps will allow Libra to become a global currency that could rival the US dollar and traditional financial infrastructure.
“Facebook is essentially trying to create a stable medium of exchange that can be used for making payments across its networks and therefore across borders,” explained George McDonaugh, co-foudner of blockchain investment firm KR1.
“Think the current functionality of Wechat, Venmo and PayPal but instead of transacting pounds and dollars, users will be transacting in Facebook’s Libra.”
How will people use Libra?
There are more than 2 billion users of Facebook around the world, as well as around 1.5 billion users of the Facebook-owned WhatsApp messaging app.
Combining this huge user base with the vast amounts of information and data Facebook collects on its users mean Libra can also go way beyond the capabilities of bitcoin and other cryptocurrencies.
“Facebook’s Libra will not compete with bitcoin [because] bitcoin is open, borderless, permissionless, censorship resistant, publicly verifiable and immutable,” Mr McDonaugh added. “Facebook’s coin cannot be any of these things because Facebook is a corporation, they have to exist within jurisdictions and comply with every rule.
“So, if bitcoin doesn’t need to worry, whose piece of the pie is Facebook taking? You’ve guessed it, the banks… Want a loan? Ask Zuckerberg, want a credit card? Ask Zuckerberg and everything will be at the click of a button on a platform that literally 30 per cent of the planet’s population are using.”
When will Libra be available?
Facebook and its partners at the Libra Association are yet to announce a release date for Libra, though it is expected to roll out in the first half of 2020.
While any user of Facebook’s apps and services will be able to use it, the tech firm is targeting developing markets in the hope that Libra will be able to serve the 1.7 billion people in the world who don’t have access to traditional financial services – the so-called ‘unbanked’.
Partners in the Libra Association include firms like Lyft, eBay, Uber and Spotify, as well as payments companies like Mastercard, PayPal, Stripe and Visa.
With the backing of such a diverse range of businesses and organisations, Libra will likely be accepted anywhere traditional payment cards are used.