Facebook recently announced it will be launching its new cryptocurrency, Libra, which sees collaboration with multiple founding members including amongst others MasterCard, Visa, PayPal, eBay, Uber and Vodafone.
Through its new subsidiary, Calibra, Facebook is expected to take the initial lead role in the project, which is hoping to launch in early 2020.
What is being planned?
The much-anticipated Libra saw the release of its white paper on 18 June 2019. The full details of Libra are still largely unknown and given its infancy is likely to evolve rapidly. However, the White Paper states the goal is to create “a stable currency built on a secure and stable open-source blockchain, backed by a reserve of real assets, and governed by an independent association”.
The Libra alliance, made up of tech and industry giants, are seemingly looking to create a new financial framework system using blockchain. They are aiming to create an entire infrastructure designed to re-imagine the financial payment landscape. The coding for the system will be open-sourced, which will encourage developers to build within the infrastructure.
Libra is planning to eventually become a decentralised system, meaning banks or payment processing partners will not be required to conduct financial transactions. In the early days, however, transactions are likely to be validated by stakeholders like Visa and Mastercard. Libra is aiming to create a new financial service infrastructure, and as its crowning glory will be a new form of cryptocurrency the Libra Coin.
What Libra is touting as unique is that its cryptocurrency is being backed by real life reserves. This hopes to bring some stability to the coin. Libra will be known as a stable coin but some purists question whether this itself disqualifies Libra from being a true cryptocurrency.
The White Paper envisages that the coin will be easy to use and easily convertible back into traditional currency – known as Fiat.
The coin and infrastructure will be managed by the Libra Association, a not for profit organisation based in Switzerland.
What are the controversies?
The White Paper itself seemingly distances Libra from Facebook and its recent controversy, not least its Cambridge Analytica saga. It highlights the reputable mainstream partners, such as Mastercard and Vodafone – and further highlights that Facebook’s interest is being run by a regulated subsidiary and that the whole project is being overseen by a not for profit organisation, set up to ensure the process is transparent and the parties accountable.
That said many are concerned about the involvement in this project of Facebook and Uber, both with poor reputations in respect of personal data. Fundamentally Blockchain itself remains somewhat at odds with GDPR and the right to be forgotten. It is unclear how this will be dealt with by the Regulators and Courts but it presents yet another obstacle for Facebook and Libra to overcome.
Further just days after the launch of the White Paper, a technology company called Hedera took out an advert in the Wall Street Journal in which it purported to thank Facebook and said imitation is the sincerest form of flattery. It remains to be seen whether any formal dispute will materialise or whether the negative PR will have any effect on Libra and/or Facebook.
Finally many speculate over why Facebook has invested in this venture and what they are getting out of the project. Some anticipate that Facebook will utilise its social media messaging, such as WhatsApp to disseminate the coins and share access to the platform others question whether and to what extent Facebook will have access to data collected via Libra and stored forever on its blockchain. What is clear is that the coin will have a significant reach given the domination of Facebook in the market.
It remains to be seen how successful the new Libra project will be as it is still at a very early stage. However, it has involvement from a number of large organisations who clearly see the merit and excitement in revolutionising the financial landscape.
It will be interesting to learn about the take-up of the coin and whether consumers are willing to place their trust in the project given Facebook’s poor record of data protection or how much value is actually placed in this, given Facebook still dominates social media.
