The United States dollar. The British pound. The euro. Most everyone is familiar with the names of some of the world’s best-known currencies.
Could the Libra be the next?
Libra is the codename for a cryptocurrency that Facebook has been developing; the company reportedly will debut it next week and launch it in 2020. Unlike traditional, physical currencies, cryptocurrencies are all digital and used only for digital purchases and transactions. They also are not under the control of any nation’s central bank, such as the U.S. Federal Reserve. Dozens of cryptocurrencies currently are available for use, with Bitcoin being the best-known of those.
That could change, should Libra succeed. And according to the Wall Street Journal, Facebook is lining up some deep financial pockets to provide the monetary backing behind Libra.
Facebook reportedly has secured the support of credit card giants Visa and MasterCard as well as payments processing leader PayPal to invest at least $10 million each in a group that will oversee the creation and support of its cryptocurrency plan. Uber also is said to be getting in on the Libra group, suggesting that at some point those using the ride-hailing service might be able to use Libra as means of paying for their rides.
A Facebook spokesperson confirmed that the company has a “new small team (that) is exploring many different applications” for the technology behind a cryptocurrency, but that person wouldn’t comment further upon the status of its efforts.
“Facebook could be seeing the advantage to having this type of payment system inside of their apps,” said Bill Xing, founder and director of Panda Analytics, a New York-based developer of software used to create cryptocurrency index platforms. “I think Facebook is trying to take advantage of the technology to get on this game.”
Facebook is said looking to raise as much as $1 billion to support Libra, and that it will be tied to a so-called “basket” of government currencies in an effort to keep it from falling victim to the broad highs and lows that have characterized the valuations of other cryptocurrencies. The Wall Street Journal said that while Facebook is developing the technology behind Libra, it will not exert direct control over the cryptocurrency.
However, that doesn’t mean Facebook won’t have any kind of influence in how Libra is used, and how it could play a role in the Facebook ecosystem.
“This gives Facebook the power of printing cash in a crypto economy, but it has epic scale implications for e-commerce on a global basis,” said Eric Schiffer, president of Los Angeles-based private investment firm the Patriarch Organization. “And unlike Bitcoin, each transaction is going to be on heavy radar and transparent to (federal) regulators.”
Schiffer added that it’s likely Facebook sees cryptocurrency as another conduit for new revenue streams on the social media platform, and that it could offer incentives such as free Libra “coins” to user who view certain kinds or amounts of ads. Schiffer said such a Facebook offering could “soften the ‘enemy of the people’ negative feedback about advertising model while collecting far deeper info on users and how they spend to better monetize with advertisers.”
