Facebook has revealed plans for a new global digital currency with the backing of more than two dozen companies ranging from Visa and Mastercard to Lyft and Spotify, bringing the heft of the world’s largest social network to efforts to transform financial services.
The scope of Facebook’s ambitions for the new currency, called Libra, were made clear as it claimed 1.7bn people around the world without a bank account would be able to use it to make instant and nearly free international money transfers from their mobile phones.
With traditional banks and the other large technology companies sitting on the sidelines for now, and with regulators taking a cautious approach to digital currencies, Facebook on Tuesday began the task of persuading merchants to use Libra as a means of payment and consumers to see it as a safe store of value.
“The internet [ . . .] has given everyone access to the world’s information, and democratised access to free communications, but money has stayed the same,” said David Marcus, the former president of PayPal who joined Facebook in 2014 and has steered the Libra project.
So far 28 groups including payments companies, ecommerce groups and venture capital companies have said they will become backers and integrate the technology into their services. Some have signed up recently — PayPal said it had only been in talks with Facebook for a “few weeks” — but Facebook hopes that 100 groups will have joined before the currencylaunches.
Each founding partner in the Libra Association is expected to contribute a minimum of $10m to help kick-start the project.
Libra will be backed by a pool of currencies and assets stored around the world. It will not therefore have a fixed exchange rate against traditional currencies such as dollars and euros, though it will not swing as wildly as cryptocurrencies such as bitcoin.
Apple, Google, Amazon and Microsoft have not yet signed up. Banks decided not to join the starting roster because of uncertainties about regulation and concerns over logistical issues that could hamper take-up, several industry executives told the Financial Times.
Facebook’s move is the most significant effort yet to bring blockchain technology, which does not rely on a central authority to issue money, into the mainstream and comes after the launch of hundreds of digital currencies, not least the 10-year-old bitcoin.
“We believe that people will increasingly trust decentralised forms of governance,” said Facebook and its partners in a statement announcing their proposal. “This could bring cryptocurrencies to the hundreds of millions,” said Jim Migdal, head of business development at Coinbase, a cryptocurrency exchange.
If successful, the project could dramatically reshape some corners of the finance industry, disintermediating payments platforms and stealing business from retail banks and fintech groups, particularly those that specialise in sending payments across borders.
Jorn Lambert, executive vice-president for digital solutions at Mastercard, said he was not worried that fee-free transactions would threaten the payment card business. “It’s an addition to what we do, not instead of what we do. It is not a zero-sum game. Today, 85 per cent of transactions are made in cash.”
It is unclear whether Libra will clear the steep hurdles needed to get off the ground, win over regulators, such as the US Securities and Exchange Commission, and be embraced, or strongly resisted, by the financial services industry. Central banks have already questioned the impact of company-created cryptocurrencies on financial stability.
“We see hurdles to scale, we see hurdles to adoption, we see enough of this to decide that we would not participate in a scheme like this,” said a senior payments executive at a large global bank.
He said Facebook may also struggle to explain the complexity of the coin to consumers and merchants alike and that there would also be big regulatory challenges since “it isn’t that Facebook has a very stellar record on high walls” between different parts of its business.
Facebook will spin off a unit, called Calibra, to manage its own digital wallet service, which will be integrated into its family of apps. Facebook said that financial data gathered by Calibra would not be used to target advertising, and not be shared with Facebook or third parties “without customer consent”.
Facebook said know-your-customer information would be collected and government-issued ID would be required for accounts. It added that it would use computer programs to detect suspicious transactions.
The move comes as Facebook has been battling public anger and heightened regulatory scrutiny due to concerns over data privacy, allegations that it has failed to responsibly prevent abuse on its platform and employed anti-competitive practices in the pursuit of growth.
Facebook has recently set its sights on tapping new revenue streams beyond advertising, by introducing payments and ecommerce to its apps and taking a cut of transactions. Analysts say the company is mirroring so-called super apps such as China’s WeChat, where users can communicate but also do online shopping and order a taxi without ever leaving the one platform.
Additional reporting by Laura Noonan, Robert Armstrong and Martin Coulter
Who is backing Libra so far?
Mastercard, PayPal, PayU, Stripe, Visa.
Tech and consumer
Booking Holdings, eBay, Facebook, Farfetch, Lyft, Mercado Pago, Spotify, Uber.
Anchorage, Bison Trails, Coinbase, Xapo Holdings.
Andreessen Horowitz, Breakthrough Initiatives, Ribbit Capital, Thrive Capital,
Union Square Ventures
Creative Destruction Lab, Kiva, Mercy Corps, Women’s World Banking
- Nissan Inks MoU With Kerala Government for First Global Digital Hub in India
- Opengear Unveils New NetOps Automation™ Platform at Cisco Live
- Facebook adds New Orleans to nationwide program to boost digital training
- Ukrainian companies mint 25 digital coins, raise $132 mln
- Instagram unveils new video service in challenge to YouTube; ads expected to follow
- Apple takes swipe at Facebook with new data privacy tools
- RI lawmakers unveil new state budget
- Kony Unveils New Digital Banking Solution – Kony DBX
- Cisco unveils new initiative to help startups in Bangladesh
- EU targets Google, Facebook with global digital tax plan
- Apple unveils new iPhone features to include ways to use it less
- Facebook unveils Musical.ly competitor called Lip Sync Live
Facebook unveils new global digital coin called Libra have 1001 words, post on www.ft.com at June 18, 2019. This is cached page on VietNam Breaking News. If you want remove this page, please contact us.