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Facebook published a white paper unveiling more details on Libra, its forthcoming cryptocurrency, which it’s readying for a 2020 roll out after months of rumors. Facebook is also launching Calibra, a subsidiary company that will protect user privacy and ensure transaction data stays separate from Facebook data, per TechCrunch.
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Libra will enable global commerce and peer-to-peer (P2P) payments at little to no cost. Users can spend Libra through third-party mobile wallets or a Calibra wallet, which will be built into Messenger and WhatsApp. Consumers can buy or cash out Libra online or in-store at exchange locations like grocery stores.
Facebook VP of blockchain product Kevin Weil told Business Insider that Libra could evolve into more sophisticated financial products, like credit — likely to allow Facebook to monetize the offering down the line. Further, Libra could allow Facebook to diversify its revenue streams beyond advertising, which it’s been looking for ways to do.
Facebook is developing Libra in partnership with 28 other founding members of the Libra Association. The consortium includes payments, tech, nonprofit, and blockchain firms that have invested a minimum of $10 million each.
Members include Mastercard, Visa, PayPal, Stripe, and Uber, and Facebook hopes to grow to 100 members by Libra’s launch. Each member gets a vote in the council, ensuring decentralization — something Facebook CEO Mark Zuckerberg pointed out to address privacy concerns.
The Libra Association is ensuring price stability — which means the crypto could catch on with merchants, while threatening remittance firms on cross-border transfers.
- Libra addresses pain points like price volatility, which have inhibited cryptos from mainstream merchant acceptance. Libra’s value will be pegged to a basket of global currencies to avoid price volatility. It’s intended to remain stable to give merchants confidence that the value won’t fluctuate on a daily basis or change before a purchase actually clears, like with other cryptos. Further, the firms are aiming to make Libra simpler to accept than other cryptos like Bitcoin, and that will become cheaper, more accessible to the unbanked, and more ubiquitous as a payment method.
- Libra is intended to make sending money as easy as sending a message in Messenger — which could disintermediate remittance firms. Facebook highlighted the average 7% fee that remittance firms charge to send money abroad as something Libra is addressing. Legacy remittance firms are already being threatened by the slew of digital-first upstarts that undercut them on speed, pricing, and ease of use. But Libra could exacerbate that threat by simplifying the process of sending cross-border transfers and offering the same cryptocurrency and platform for small purchases at merchants and for high-value cross-border transfers — which could also threaten digital upstarts.
Libra’s already facing backlash from European lawmakers — which means its launch could be an uphill battle. Within hours of Facebook’s announcement, authorities from France, Germany, and Italy expressed concerns with Libra and its implications on illegal activity or its ability to be regulated. Markus Ferber, a German member of the European Parliament, for example, said the new currency could turn Facebook into a "shadow bank," which should "set off alarm bells for regulators." Effectively promoting Libra is likely to be a challenge for Facebook and the other firms, particularly amid pushback from global regulators who are already skeptical about cryptos.
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