- Jul 27, 2021
Facebook will launch in 2020 its own currency: Libra. Users of WhatsApp and Messenger can exchange money from their digital wallet and Facebook will also offer the service as a standalone app.
The presentation document states that the central objective of this new currency will be to facilitate the exchange of money in the developing world: “1.7 billion people do not have a bank account, 31% of the world’s population,” says the company on the web to present the project. Libra aims to reach those users: It would be their account, where they can save, pay and send transfers. On the price of the shipments, Facebook only says that it will be “without cost or low cost“.
The company has presented its new currency with a video focused on developing countries, where Manila and Mexico City appear and there is hardly a white person. The launch has been at a time when in the United States they sleep, but the rest of the world is awake. It is a clear message that the country of origin of Facebook is not the priority of Libra, whose legal headquarters will be in Switzerland.
With the expectation of creating a revolution in the financial sector, the company presided by Mark Zuckerberg says that the time of the “internet of money” has arrived, as if it were the next stage behind the “Internet of Things”. In the last Facebook conference for developers, the founder of the company said that “it should be as easy to send money through the network as it is to send a photo.” This project, which had been rumored for months, is the fulfillment of that desire.
The hope of Libra is to gather several benefits that together lead him to be dominant. It will be easy to create, fewer commissions, more accessible to people without account in traditional banks and more resistant and expansive thanks to decentralization.
In the presentation of Calibra, which is the name of the subsidiary company of Facebook. The company will provide financial services, the company provides an initial document where it establishes the principles that the currency will have. “A cryptocurrency of low volatility, based on decentralized blockchain with the objective to create a new opportunity for responsible financial services innovation “.
Facebook has created its blockchain to manage Libra. Blockchain is a system of shared servers maintained by independent groups that certify the transactions that occur in those networks. Nobody has all the control.
Libra will be supported by a real reserve – the pound reserve – and may be exchanged for other real currencies based on a stable exchange rate. Stability is key to success: users will not use pound if they believe that the next day can be worth 10% less.
To help give confidence to a new currency and get more adoption in its beginnings, traditionally the notes of a country could be exchanged for real resources, like gold. Instead of supporting gold with gold, it will be supported by a collection of low volatile resources, such as bank deposits and short-term government securities of stable and reputable central bank currencies. This detail is the one that most distances this new currency from common cryptocurrencies, such as bitcoin, which do not have a reserve behind and their exchange rate varies easily.
The Libra address will be provided by the Libra Association, based in Geneva (Switzerland), and will be formed by Facebook partners in this adventure. The company expects to have up to 100 companies with nodes associated with the project when it is launched in the market in 2020. But at the moment there are already impressive names from several sectors: Mastercard, Paypal, Visa, Booking, eBay, Spotify, Uber, Vodafone, Coinbase. Its objective will be to “coordinate and provide a framework for the government of the network and direct the loans of social impact in support of financial inclusion”. When the network is complete, the power of Facebook in the Libra Association will be 1%.
Among the partners at the moment are not the other four big technology companies Apple, Amazon, Microsoft or Google.
Facebook will maintain privileges direction of the project during 2019, but once it launches it will be one among its founders. “Facebook and its affiliates will have the same obligations, privileges and financial obligations as any other founding member The role of Facebook in the government of the association will be the same as that of their peers.”
The users of cryptocurrencies
Libra has few features that will satisfy the usual users of cryptocurrencies: Crypto people value the freedom of not needing a bank to operate. Facebook is not the company with the best reputation for that and less along with many other companies that will see all network operations
But it can be “a positive step” for developing markets. The worry now about the income with pound does not seem the priority before the future possibility of becoming the great bank of the people who do not have a bank. “If for now, the market they are trying to attack is the international money transfer sector like Western Union, they have a lot of room to earn something with commissions,” says Marcos.
The underlying doubts remain in what information will know this group of companies that control the nodes: “That information is very valuable. They may only see that someone called 1x4j has sent money to 34b, but if one of the two makes the transaction from their Facebook, maybe Facebook does, says Marcos. The focus on developing countries – where privacy is not their main concern – can make these challenges not so much affect the future of Libra.
Another of the traditional accusations of cryptocurrencies that Facebook tries to avoid from the beginning is its illegal use. “Libra will implement an effective program to combat money laundering and terrorist financing,” Facebook says in its list of intentions.