Update: Facebook has announced that it will not launch Libra until it has resolved all regulatory concerns and received the necessary permissions. The change of plans follows concerns expressed by the United States alleging its “possible speculative use” and its potential for money laundering. In spite of this, Facebook maintains 2020 as the launch date for Libra.
Facebook recently announced plans to launch a new cryptocurrency called Libra. According to the social media giant, the new payment solution will be designed as a form of digital money that can be used to pay for both online and offline payments. In the past, cryptocurrencies such as Bitcoin have had a common problem – their value is purely based on a speculative value which is why the exchange to fiat currencies (those backed by governments) varies so much.
In contrast, Facebook’s non-profit organization called the Libra Association who will oversee the currency and its development as well as create an asset pool to ensure every unit of Libra currency is backed by something that has intrinsic value. Facebook has already signed up 27 other partners, including venture capital firms, and large corporates including Coinbase, eBay, Mastercard, PayPal, Spotify, Uber, and Lyft, to name just a few.
This should provide the certainty that potential users of unbacked cryptocurrencies often miss, and also encourage people the currency won’t be used for nefarious means. And herein lies the big question, if Facebook is handing this over to a non-profit organization, where is the value for Facebook’s shareholders?
Facebook is launching a new subsidiary called Calibra, which will create a digital wallet that will live inside Facebook Messenger and WhatsApp as well as iOS and Android apps. Over time, Calibra could also start to offer financial services through the platform, and that is where the upside for the organization will be.
After all, Libra could offer a compelling alternative to the existing banking system and more importantly make Facebook even more embedded into people’s lives. Facebook says the initiative is part of its mission to connect the planet and has already launched efforts to bring free internet to people in Africa and India through its controversial Free Basics initiative and is now looking to expand that to finance.
The company says that almost half of the world’s adults do not currently have an active bank account, and approximately 70% of small businesses in developing countries lack access to credit. By providing credit to small businesses, not only could Libra make Facebook a lot of money but it could also do a lot of good. Or as in the case of its Free Basics initiative, some unintended negative consequences could occur.
How will it affect you?
In the short term, it may become the default currency for any transactions between the 2.7 billion users of Facebook, Instagram, and WhatsApp. As its popularity grows, Facebook will be able to capture more and more data about your online purchasing behavior.
While you may not be able to control how the data Facebook gathers about you is used, you can limit the information it collects by using virtual proxy networks such as Panda Dome VPN. VPNs enable you to maintain your privacy by encrypting your data and internet requests before they ever hit the wireless network to ensure the only person that can see your data is you.