After more than a year in development, Facebook’s cryptocurrency, codenamed Libra, is expected to be unveiled on June 18 and launched in 2020. Widely believed to be the social media giant’s most secretive project, Libra is a digital coin that users can transfer to each other and can use for purchases both on Facebook as well as the Internet. Many details of the project are yet to be released.
Here’s what we know about the new cryptocurrency:
Who are the stakeholders in Facebook’s new cryptocurrency venture?
Facebook has signed up with many technology and payment companies including Visa, Mastercard, PayPal Holdings and Uber Technologies. Financial-technology firm Stripe and travel-reservation site Booking.com have signed on as well.
Facebook and its partners are set to unveil the Libra Association and the Libra Blockchain tomorrow. The social media giant is likely to retain the codename for the cryptocurrency.
How is the cryptocurrency expected to work?
It will be a stable coin (meaning that it will be pegged to another stable asset, such as gold or the US dollar) and traded at a fixed price, unlike conventional digital money like Bitcoin, which is highly volatile.
The Libra Blockchain will be backed by the Libra Reserve, “a reserve of real assets” that will provide the cryptocurrency with “stability, low inflation, global acceptance, and fungibility,” the Block reported citing an unspecified blog post from Facebook.
According to Wall Street Journal, the venture capitalists, financial and e-commerce companies and telecommunications firms will invest around $10 million each in a consortium that will govern the digital coin. The money will be used to fund the creation of Libra.
The volatility of bitcoin and other cryptocurrencies not backed by hard assets has hampered their usefulness in payments, but a stable coin from Facebook, backed by a government currency, could position it as a legitimate method of payment.
Facebook won’t directly control the coin, nor will the individual members of Libra Association. Some of the members could serve as “nodes” along the system that verify transactions and maintain records of them, creating a brand new payments network, the Wall Street Journal reported.
What are the main challenges to the new cryptocurrency?
Cryptocurrencies have so far failed to catch on in making payments, and the regulatory challenges in the US and elsewhere are high. TheWall Street Journal reported members' concerns that the token could be used to launder money and finance terrorist organizations.
For Facebook, this may be a delicate time to enter new territory, as questions still remain on whether the site can realistically pull off a privacy-focused platform after many issues with users, investors and regulators. Facebook, on the other hand, is leveraging the fact that third of the world’s population log on to the social media site, and they all need to buy things.
(Writing by Seban Scaria, editing by Daniel Luiz)
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