Rumours have been swirling around Facebook’s cryptocurrency for months, but now the company finally appears to be ready to reveal what it’s been working on. Mark Zuckerberg’s firm is expected to release a white paper outlining the technical details of its plans today – with a full launch to come next year.
The cryptocurrency is a big move for the company, which has faced two years of intense scrutiny over the impact of foreign interference and poor privacy practices. It’s believed the new digital token could not only be used to send funds through Facebook – and its subsidiaries WhatsApp, Messenger and Instagram – but also to make online purchases with retail websites at a lower fee to what standard banks and credit card services offer.
While Facebook has repeatedly declined to comment on its move into cryptocurrency, various media interviews with its partners have given us a glimpse of what we might expect. Here’s what we know at this stage.
It could be called Libra
The currency has variously been called Libra and GlobalCoin, with the first speculated to be the likely public brand: Facebook acquired the trademark “Libra” in February and set up a new financial technology company called Libra Networks in May. The Geneva-based firm will focus on “investing, payments, financing, identity management, analytics, big data, blockchain and other technologies,” according to public filings reported by Reuters.
Whatever Facebook decides to call it, the cryptocurrency may be a new era of commerce and payments for the social network. It could be used to make payments between friends or family at no or low costs through the firm’s wholly-owned apps WhatsApp and Messenger. (Facebook has already been experimenting with payments through WhatsApp in India). Bypassing credit card transaction fees, could also offer a cheaper way to pay online merchants. And understanding who buys what and when would certainly help Facebook in its main business: targeted advertising.
Bloomberg reports suggest that Facebook will initially focus on the remittance market in India – where some 200 million people use WhatsApp. The country’s market for payments being sent home is one of the biggest in the world, with the World Bank saying $80m (£63m) was returned to the country last year.
Why it’s going to be a stable coin
Stablecoins seem to be the crypto sector’s new bet. And it appears Facebook is key to move into the emerging market. There are nearly 230 stablecoin projects underway of which 30 were announced in 2019 alone, according to Stable.Report, a website that tracks the “stable cryptocurrency” sphere.
Bitcoin is notorious for being a highly volatile asset as its value is determined by supply and investor demand. But stablecoins are supposedly steady in value since they are tied to a basket of traditional real world currencies such as the US dollar. And stability is a key concern for Facebook since it is hoping to appeal to developing countries with a volatile local currency. In Kenya, for instance, 90 per cent of adults already use the successful M-Pesa mobile money system.
To ensure stability of its own cryptocurrency, Facebook will need to have access to a securely stored basket of matching fiat currencies. With the massive piles of cash and resources it has available, the social media giant might actually be able to pull this off and deposit reserves in commercial banks.
There’s backing from big financial groups
Facebook is taking its coin seriously. It has reportedly sealed deals with over a dozen financial, e-commerce and other tech firms – including Visa, Mastercard, PayPal, Uber and Spotify – charging each around $10m (£8m) to join an independent body known as the Libra Association that will be based in Switzerland and govern Facebook’s digital token.
This move is meant to encourage trust in the payment system from financial regulators and users, who have increasingly been scrutinising Facebook its power and lack of responsibility. The involvement of major financial firms like Visa and Mastercard may seem surprising at first since cryptocurrencies are typically seen as a cheaper alternative to these payment networks, but their involvement may be an attempt to keep track of Facebook’s currency – and have their slice of the pie should the currency take off with Facebook’s 2.38 billion monthly active users.
Facebook’s been interested in blockchain for a while
Libra, as the blockchain initiative is called internally, was first reported on when Facebook announced that former PayPal president David Marcus, who’s run Messenger since 2014, would head a group dedicated to exploring blockchain technology. Marcus himself has owned Bitcoin since 2012, and has often spoken highly of its potential. And the company keeps looking to expand its team with more blockchain enthusiasts and experts.
In February, Facebook hired the team behind a London-based startup called Chainspace and has been offering employees working on the project the option of being paid in the token, The Information reports. Facebook’s career page currently lists 28 job openings related to blockchain. These include legal heads, based in both Silicon Valley and Hong Kong; security engineers; product designers and data scientists.
As regards to the independent consortium Libra Association: cryptocurrency exchange Coinbase, and Calibra, a subsidiary Facebook formed to oversee the social media giant’s crypto efforts, are also thought to be founding members.
It’s been speaking to banking regulators around the world
Ahead of the launch, Facebook has also been attempting to get ahead of regulators. In the UK it has hired bank lobbyist Ed Bowles, who will join the company from Standard Chartered in September. The company has also reportedly been meeting with regulators in the UK and US to discuss the currency’s opportunities and risks, as well as money transfer firms including Western Union. Getting the regulatory aspects of the currency right will be key to its success, particularly in markets like India, which is proposing a new law that would make owning and selling cryptocurrency a crime – and punishable for up to ten years in jail.
The price of Bitcoin is rising
Facebook’s new cryptocurrency could also be good news for Bitcoin, which has climbed above $9,000 (£7,100) over the weekend for the first time in over a year. The Bitcoin price has risen around 50 per cent over the last 30 days, pulling many rival coins with it including Ethereum and Litecoin. Despite this, Bitcoin still remains a long way off its peak price of $20,000 (£15,900) which it reached in late 2017. But a new wave of optimism in cryptocurrencies becoming more mainstream, fuelled by Facebook’s plans and continued interest from the likes of Amazon and Microsoft might actually help Bitcoin’s resurgence.