Facebook is set to launch a global cryptocurrency named Libra, the social media giant revealed on Tuesday.
The digital coin will come online in the first half of 2020 if regulators in Switzerland, where the new currency is to be based, give the go-ahead.
Facebook has created a management tool it has named Calibra, which will offer digital wallets to save, send and spend Libras. It will be connected to the billion-plus users of the Messenger and WhatsApp platforms as the network expands beyond social networking into the world of international finance.
The name 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 is heading up the project.
“Freedom, justice and money, which is exactly what we’re trying to do here,” he said.
The 28 partner companies in the project include household names such as Mastercard, Visa, Spotify, PayPal, eBay, Uber and Vodafone, as well as venture capital firms.
In January 2018, Facebook banned advertisements selling bitcoin and other online currencies.
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.
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.
Each partner company has invested at least $10 million into the project already, and Facebook is looking to have 100 companies on board ahead of the currency’s launch next year. Each partner company will have a vote in substantial decisions, but importantly have access to an elite second currency – the “Libra investment token”, a security offering only sold to a more exclusive audience.
While the Libra coin available to everyone with an internet connection will be backed by ordinary currencies and government securities, interest earned on that collateral will go to holders of the investment tokens, CoinDesk reported on Tuesday.
It is not clear how 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.
There are also the not-inconsequential concerns over privacy and data-sharing as Facebook grapples with a public backlash due to a series of scandals, facing opposition from privacy advocates, consumer groups and regulators.
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 for failing to prevent Russian interference in the 2016 United States presidential election through a social media disinformation campaign.
Every person who uses Calibra will have to go through a “know your customer” process, which verifies user identities to prevent financial crimes, Reuters reported.
That means anyone who signs up must share a government ID and other personal information.
Calibra will provide support to customers who lose phones or their passwords, and refund customers whose Libras are stolen by fraudsters, Facebook said.
Calibra will only share user data with parent company Facebook and third parties when it has customer consent, or in other “limited cases”- such as when law enforcement requests information – according to a statement.
Facebook pledged not to use Calibra data to improve advertising targeting.
Businesses will see the same information about customers who pay with Libra as they do about customers who pay with credit cards, Calibra executive Kevin Weil told Reuters.
SOURCE: AL JAZEERA AND NEWS AGENCIES