Social networking giant Facebook announced plans on Tuesday to launch a digital currency in 2020, in an aggressive move to push beyond digital advertising.
The currency called Libra will be overseen by a Facebook subsidiary called Calibra, which is a new nonprofit group based in Geneva.
The new cryptocurrency will initially be backed by Facebook’s expertise, but 28 founding partners have signed up to launch and govern the venture, including Visa, Mastercard, eBay, Paypal, Spotify, Lyft, and Uber.
Facebook said it is aiming to have the currency available by the first half of next year and hopes its 2.4 billion monthly users will use the new currency to send money internationally or to buy things.
The ambitious plan would replace U.S. dollars, euros, Swiss francs, yen, and pesos, and cut wire transfer fees and exchange rates. The aim is for customers to use their phones to transfer Libra to friends, and shop online as well as at stores.
“Aside from limited cases, Calibra will not share account information or financial data with Facebook, Inc. or any third party, without customer consent,” Facebook CEO Mark Zuckerberg wrote in a recent Facebook post. “Calibra’s customers’ account information and financial data will not be used to improve ad targeting on the Facebook, Inc. family of products.”
As a result, the new plan promises strong protection in place to keep its customers’ money and information safe. “Privacy and safety will be built into every step,” Zuckerberg said.
“Calibra will have a dedicated team of experts in risk management focused on preventing people from using Calibra for fraudulent purposes. We’ll provide fraud protection so if you lost your Libra coins, we’ll offer refunds,” he said. “We also believe it’s important for people to have choices so you’ll have the options to use many other third-party wallets on the Libra network.”
“Cryptography,” Zuckerberg added, “would make it harder for hackers to get hold of people’s money.”
Facebook’s years of controversy surrounding privacy and security issues could undermine the public’s trust of Facebook. Cybersecurity experts advise potential users of Libra to “proceed with caution.”
Calibra will begin by offering a digital wallet app that will also integrate with WhatsApp and Facebook Messenger, but will eventually branch out into other services.
“The motivation for this is to effectively enable a simple global currency and financial infrastructure that empowers billions of people,” Dante Disparte, head of policy and communications for the Libra Association, told NBC News.
The project would bring a consumer-friendly version of digital currencies to smartphones around the world, potentially creating a way for people to easily transfer money, build credit, and pay bills while avoiding costly fees. Libra is open source, meaning any company or person can build a business within its framework.
This is the biggest step of any major corporation into the emerging arena of digital currency and blockchain technology, representing a vote of confidence that experiments in new forms of digital payments could be more than a passing fad.
Libra, named partly after a Roman unit for weight and currency, will have echoes of bitcoin, the popular cryptocurrency, but also some key differences — most notably that it will be governed by a central authority and that its value will be tied to other assets.
Tyler and Cameron Winklevoss, bitcoin’s major shareholders, say they are not worried about Facebook entering the cryptocurrency field. This is despite their previous legal battle with Zuckerberg over founding Facebook, which ended in a hefty settlement.
“There is so much pie to grow at this point we need to be frenemies,” the Winklevoss twins recently told CBS’ Sunday Morning. A possible outcome, they said, is that Calibra “validates the industry” and drives the price of bitcoin higher.
Bitcoin has rallied above $9,000 in recent days, the highest in more than a year, as news reports about Facebook’s plans raised expectations for digital currencies.
Libra will not be exactly like bitcoin or other so-called cryptocurrencies that began emerging a decade ago. Cryptocurrencies are known for their decentralized nature, existing outside any central authority such as a government or large, corporate association.
Libra’s value will be pegged to a reserve of real, low-volatility assets, making it relatively stable compared with the notoriously fluctuating value of bitcoin, according to Facebook and the Libra Association. The reserve, or “basket,” will have assets “like bank deposits and government securities in currencies from stable and reputable central banks,” Facebook said.
Facebook said it would keep data about people’s financial transactions separate from data about social networks, so that Libra information would not be used to target advertising on Facebook or Instagram.
Facebook said it also plans to offer financial services, possibly one day including loans, through a new subsidiary that specializes in Libra.