By Staff Writer
A consortium led by Facebook has finally launched a White Paper for its cryptocurrency project Libra vowing to push for mainstream adoption of blockchain by bringing frictionless payments to the world’s nearly 2bn unbanked people.
Facebook, which has nearly 2.38bn users, announced on Tuesday that it would issue a digital currency backed by a basket of sovereign fiat currencies and securities. The unit of payment will be known as Libra as opposed “GlobalCoin” as previously reported by some.
Facebook’s about-turn on cryptocurrencies, the rumors of which had been spreading over the past few weeks, still shocked many when the firm released a 29-page official documents, or so-called White Paper, on Tuesday.
The paper hit all the right blockchain buzzwords. The token has been described as “decentralized programmable database designed to support a low-volatility cryptocurrency that will have the ability to serve as an efficient medium of exchange for billions of people around the world.”
It vowed to deliver on the “promise of the internet of money” by “facilitating frictionless payments” through “a new kind of digital currency built on the foundation of blockchain technology.”
Facebook has previously advocated a ban on crypto advertisements on the social media giant’s network in much the same way as JP Morgan’s chief executive have lambasted Bitcoin before releasing its own JPM Coin.
For its stablecoin, the company has partnered with some of the biggest names in the payment industry such as Visa, Uber, Paypal, Mastercard, Uber, Ebay and Lyft and Coinbase, each investing around $10mn to join the consortium. It also has amongst its members, telecom firms, blockchain startups, non-profits and venture capital firms though it does not include any banks.
Libra will be backed by a collection of low-volatility assets such as bank deposits and short-term government securities in currencies from stable and reputable central banks.
Calibra, a Facebook subsidiary, plans to create a digital wallet that will exist inside its Facebook Messenger and WhatsApp services, alongside standalone apps on iOS and Android, to make it easy for people to send money to each other through apps.
The users will be subject to various regulatory requirements including KYC as well as observe the AML/CFT norms.
Facebook’s Libra blockchain, which will be a permissioned network governed by its members, is launched by a non-profit Libra Association registered in Switzerland. It’s officially expected to be launched sometime in 2020, hopefully by the first half of next year. Facebook expects to have nearly 100 members join the consortium by the time of its launch, according to the White Paper.
To build its cryptocurrency project, Facebook has developed its own programming language known as Move.
Alongside the reserves-backed stablecoin, Facebook will also issue the Libra Investment Token, a security token available to the Libra Association and other accredited investors.
When launched, Facebook’s token will bring added competition to an already crowded field of cross-border payments and will put further pressure on the profit at global banks. It could turn out to be a gamechanger, simply because of the reach of its social media network, not least to the crypto payments industry.
“But the existing blockchain systems have yet to reach mainstream adoption,” the social media giant laments in the document. “Mass-market usage of existing blockchains and cryptocurrencies has been hindered by their volatility and lack of scalability, which have, so far, made them poor stores of value and mediums of exchange.”
Global regulators are already voicing their concerns. The Group of Seven nations has said that it would set up a forum to examine the risks of such cryptocurrencies to the system, according to a letter sent by the French finance minister Bruno Le Marie.
French Finance Minister Bruno Le Marie said the digital currency known as Libra shouldn’t be seen as a replacement of traditional currency.
The Bank of England Governor Mark Carney said it welcomed the Facebook’s currency with an “open mind” but not an “open door” and that the Facebook would have to meet the “highest standards.”
There is also a debate about whether Libra can be called “cryptocurrency” because it is run on a permissioned blockchain and not a public blockchain (see here).
Still, exciting times ahead for the industry, for sure.