Facebook reveals Libra cryptocurrency, with lofty goals
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[June 18, 2019] By
Katie Paul and Anna Irrera
SAN FRANCISCO/NEW YORK (Reuters) - Facebook
Inc revealed plans on Tuesday to launch a cryptocurrency called Libra,
the latest development in its effort to expand beyond social networking
and move into e-commerce and global payments.
Facebook has linked with 28 partners in a Geneva-based entity called the
Libra Association, which will govern its new digital coin set to launch
in the first half of 2020, according to marketing materials and
interviews with executives.
Facebook has also created a subsidiary called Calibra, which will offer
digital wallets to save, send and spend Libras. Calibra will be
connected to Facebook's messaging platforms Messenger and WhatsApp,
which already boast more than a billion users.
The Menlo Park, California-based company has big aspirations for Libra,
but consumer privacy concerns or regulatory barriers may present
Facebook hopes it will not only power transactions between established
consumers and businesses around the globe, but offer unbanked consumers
access to financial services for the first time.
The name "Libra" was inspired by Roman weight measurements, the
astrological sign for justice and the French word for freedom, said
David Marcus, a former PayPal executive who heads the project for
"Freedom, justice and money, which is exactly what we're trying to do
here," he said.
Facebook also appears to be betting it can squeeze revenue out of its
messaging services through transactions and payments, something that is
already happening on Chinese social apps like WeChat.
The Libra announcement comes as Facebook is grappling with public
backlash due to a series of scandals, and may face opposition from
privacy advocates, consumer groups, regulators and lawmakers.
Some Facebook adversaries have called for the company to incur
penalties, or be forcibly broken up, for mishandling user data, allowing
troubling material to appear on its site and not preventing Russian
interference in the 2016 presidential election through a social media
It is not clear how lawmakers or regulators will react to Facebook
making a push into financial services through the largely unregulated
world of cryptocurrency.
In recent years, cryptocurrency investors have lost hundreds of millions
of dollars through hacks, and the market has been plagued by accusations
of money-laundering, illegal drug sales and terrorist financing.
Facebook has engaged with regulators in the United States and abroad
about the planned cryptocurrency, company executives said. They would
not specify which regulators or whether the company has applied for
financial licenses anywhere.
Facebook hopes it can bring global regulators to the table by
publicizing Libra, said Kevin Weil, who runs product for the initiative.
"It gives us a basis to go and have productive conversations with
regulators around the world," said Weil. "We're eager to do that."
Bitcoin, the most well-known cryptocurrency, was created in 2008 as a
way for pseudonymous users to transfer value online through encrypted
digital ledgers. Early developers believed that the world needed an
alternative to traditional currencies, which are controlled by
governments and by central banks.
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A 3D-printed Facebook
logo standing on PC motherboard is seen in this illustration
picture, October 26, 2017. Picture taken October 26, 2017.
REUTERS/Dado Ruvic/File Photo
Since then, thousands of bitcoin alternatives have launched, and
Facebook is just one of dozens of blue-chip companies dabbling with the
underlying technology. But its status as a Silicon Valley behemoth that
touches billions of people around the world has created significant buzz
around Libra's potential.
Partners in the project include household names like Mastercard Inc,
Visa Inc, Spotify Technology SA, PayPal Holdings Inc, eBay Inc, Uber
Technologies Inc and Vodafone Group Plc, as well as venture capital
firms like Andreessen Horowitz.
They hope to have 100 members by Libra's launch during the first half of
2020. Each member gets one vote on substantial decisions regarding the
cryptocurrency network and firms must invest at least $10 million to
join. Facebook does not plan to maintain a leadership role after 2019.
Though there are no banks among the inaugural members, there have been
discussions with a number of lenders about joining, said Jorn Lambert,
executive vice president for digital solutions at Mastercard. They are
waiting to see how regulators and consumers respond to the project
before deciding whether to join, he said.
The Libra Association plans to raise money through a private placement
in the coming months, according to a statement from the association.
PRIVACY, REGULATORY CONCERNS
Although Libra-backers who spoke to Reuters or provided materials are
hopeful about its prospects, some expressed awareness that consumer
privacy concerns or regulatory barriers may prevent the project from
Calibra will conduct compliance checks on customers who want to use
Libra, using verification and anti-fraud processes that are common among
banks, Facebook said.
The subsidiary will only share customer data with Facebook or external
parties if it has consent, or in "limited cases" where it is necessary,
Facebook said. That could include for law enforcement, public safety or
general system functionality.
Transactions will cost individuals less than merchants, Facebook said,
though executives declined to provide specifics. Each Libra will be
backed by a basket of government-backed assets.
The company plans to refund customers who lose money because of fraud,
Sri Shivananda, Paypal's chief technology officer said in an interview
that the project is still in its "very, very early days," and there were
conversations in progress with regulators.
Mastercard's Lambert characterized Libra similarly, noting much needed
to happen before the launch.
If the project receives too much regulatory pushback, he said, "we might
(Reporting by Katie Paul and Anna Irrera; Editing by Lauren Tara LaCapra
and Lisa Shumaker)
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