Facebook Prepares For Launch Of Digital Currency Libra.
Similar to Bitcoin, the digital currency Facebook has devised is based on blockchain technology, but is meant to exist without being subject to price fluctuations.
Facebook will have no access to transaction data, said David Marcus, project manager for the currency, which is named Libra.
Initially, the Libra system will be used mainly for transfers between different currencies, Marcus told dpa. The longer-term vision, however, is to make Libra a full-fledged means of payment.
To achieve that goal Facebook forged an alliance - the Libra Association based in Geneva, Switzerland. Among its current 28 members are financial service providers Visa Inc, Mastercard Inc and Paypal, high-profile companies that that can facilitate the integration of Libra into payment systems.
In addition, the companies Vodafone Group PLC and Ebay, the travel platform Booking.com and the top music-streaming app Spotify are on board as are ride-hailing companies Uber and Lyft.
All have invested at least USD10 million to be among the founding members and met the criteria that they have a market value of at least USD1 billion or more than 20 million customers.
Marcus hopes the Libra Association will have more than 100 members by the planned launch of the currency next year. He stressed that neither Facebook nor any single company will control or operate it.
Blockchain currencies like Bitcoin are infamous for massive price swings, which is something Facebook desperately wanted to avoid in crafting Libra. Therefore Libra will be fully covered by a reserve fund made up of different currencies.
"We're backing this new digital currency with a full one-to-one reserve of some of the world's best assets - securities and currencies from the world's best central banks," Marcus said, citing the European Central Bank, the US Federal Reserve, the Bank of England and the Bank of Japan.
The Libra Association also will determine how currencies and securities such as bonds are held in reserve to maintain a stable price. Unlike Bitcoin, Libra is not a currency produced by the users. It will have to be purchased from members of the association or from trading platforms.
Facebook has no doubt that Libra eventually will become global and usable to purchase anything, anywhere. But Marcus believes as with any new currency, it will take time for it to grow. One reason is that in the developed world, existing payment channels already work well.
"I think at least in the next 10 years we all will pay our taxes and get our payrolls in the sovereign money of the countries we all live in," Marcus said.
"The real question is, what happens in economies where the home currency has a lot of inflation, where you don't have access to financial services."
The answer there might be radically different with a network like Libra presenting a solution, he added. One notable absence is China, where Libra won't be available.
To hold Libra, providers will need a so-called digital wallet. Facebook wants to be one of many wallet providers, and for that purpose it founded the subsidiary Calibra with Marcus at the helm.
Calibra creates what Marcus called a "proper separation between financial data and social data."
By Andrej Sokolow and Christoph Dernbach, dpa
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|Date:||Jun 18, 2019|
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