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Facebook reveals Libra cryptocurrency, with lofty goals


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SAN FRANCISCO/NEW YORK (Reuters) - Facebook Inc revealed plans on Tuesday to launch a cryptocurrency called Libra, the latest development in its effort to expand beyond social networking and move into e-commerce and global payments.




Facebook has linked with 28 partners in a Geneva-based entity called the Libra Association, which will govern its new digital coin set to launch in the first half of 2020, according to marketing materials and interviews with executives.


Facebook has also created a subsidiary called Calibra, which will offer digital wallets to save, send and spend Libras. Calibra will be connected to Facebook’s messaging platforms Messenger and WhatsApp, which already boast more than a billion users.


The Menlo Park, California-based company has big aspirations for Libra, but consumer privacy concerns or regulatory barriers may present significant hurdles.


Facebook hopes it will not only power transactions between established consumers and businesses around the globe, but offer unbanked consumers access to financial services for the first time.


The name “Libra” was inspired by Roman weight measurements, the astrological sign for justice and the French word for freedom, said David Marcus, a former PayPal executive who heads the project for Facebook.


“Freedom, justice and money, which is exactly what we’re trying to do here,” he said.


Facebook also appears to be betting it can squeeze revenue out of its messaging services through transactions and payments, something that is already happening on Chinese social apps like WeChat.


The Libra announcement comes as Facebook is grappling with public backlash due to a series of scandals, and may face opposition from privacy advocates, consumer groups, regulators and lawmakers.


Some Facebook adversaries have called for the company to incur penalties, or be forcibly broken up, for mishandling user data, allowing troubling material to appear on its site and not preventing Russian interference in the 2016 presidential election through a social media disinformation campaign.


It is not clear how lawmakers or regulators will react to Facebook making a push into financial services through the largely unregulated world of cryptocurrency.


In recent years, cryptocurrency investors have lost hundreds of millions of dollars through hacks, and the market has been plagued by accusations of money-laundering, illegal drug sales and terrorist financing.


Facebook has engaged with regulators in the United States and abroad about the planned cryptocurrency, company executives said. They would not specify which regulators or whether the company has applied for financial licenses anywhere.


Facebook hopes it can bring global regulators to the table by publicizing Libra, said Kevin Weil, who runs product for the initiative.


“It gives us a basis to go and have productive conversations with regulators around the world,” said Weil. “We’re eager to do that.”


Bitcoin, the most well-known cryptocurrency, was created in 2008 as a way for pseudonymous users to transfer value online through encrypted digital ledgers. Early developers believed that the world needed an alternative to traditional currencies, which are controlled by governments and by central banks.


Since then, thousands of bitcoin alternatives have launched, and Facebook is just one of dozens of blue-chip companies dabbling with the underlying technology. But its status as a Silicon Valley behemoth that touches billions of people around the world has created significant buzz around Libra’s potential.


Partners in the project include household names like Mastercard Inc, Visa Inc, Spotify Technology SA, PayPal Holdings Inc, eBay Inc, Uber Technologies Inc and Vodafone Group Plc, as well as venture capital firms like Andreessen Horowitz.


They hope to have 100 members by Libra’s launch during the first half of 2020. Each member gets one vote on substantial decisions regarding the cryptocurrency network and firms must invest at least $10 million to join. Facebook does not plan to maintain a leadership role after 2019.


Though there are no banks among the inaugural members, there have been discussions with a number of lenders about joining, said Jorn Lambert, executive vice president for digital solutions at Mastercard. They are waiting to see how regulators and consumers respond to the project before deciding whether to join, he said.


The Libra Association plans to raise money through a private placement in the coming months, according to a statement from the association.




Although Libra-backers who spoke to Reuters or provided materials are hopeful about its prospects, some expressed awareness that consumer privacy concerns or regulatory barriers may prevent the project from succeeding.


Calibra will conduct compliance checks on customers who want to use Libra, using verification and anti-fraud processes that are common among banks, Facebook said.


The subsidiary will only share customer data with Facebook or external parties if it has consent, or in “limited cases” where it is necessary, Facebook said. That could include for law enforcement, public safety or general system functionality.


Transactions will cost individuals less than merchants, Facebook said, though executives declined to provide specifics. Each Libra will be backed by a basket of government-backed assets.


The company plans to refund customers who lose money because of fraud, Facebook said.


Sri Shivananda, Paypal’s chief technology officer said in an interview that the project is still in its “very, very early days,” and there were conversations in progress with regulators.


Mastercard’s Lambert characterized Libra similarly, noting much needed to happen before the launch.


If the project receives too much regulatory pushback, he said, “we might not launch.”




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Facebook launches cryptocurrency with Visa, MasterCard, Uber, and others

Facebook plans to bring payments to Whatsapp and Messenger in 2020.

Facebook CEO Mark Zuckerberg in 2017.
Enlarge / Facebook CEO Mark Zuckerberg in 2017.
Mark Zuckerberg
Facebook is leading a broad coalition of companies and organizations launching a new cryptocurrency, the company announced on Tuesday. The cryptocurrency, called Libra, will be backed by a basket of conventional currencies and other stable assets, preventing the wild price swings that have plagued bitcoin and most other cryptocurrencies.


The new cryptocurrency will serve as the foundation for a new payment feature for Facebook Messenger and the Facebook-owned Whatsapp. Facebook says it is creating a new subsidiary called Calibra to oversee its payment initiatives. This is partly to reassure people who are concerned about Facebook's privacy record.


"Aside from limited cases, Calibra will not share account information or financial data with Facebook or any third party without customer consent," Facebook says. "This means Calibra customers’ account information and financial data will not be used to improve ad targeting on the Facebook family of products."


Facebook is following in the footsteps of Chinese messaging app WeChat, which has included payment capabilities for a number of years. WeChat's payment feature is widely used in China—both for paying bills and for sending small payments to friends. Facebook is aiming to bring the same functionality to its own messaging products.

A new global standard?

To help make its payments platform a ubiquitous global standard, Facebook is opening up the underlying blockchain platform to a wide range of other companies or organizations. More than two dozen entities have signed on to be founding members of the Libra organization, including Visa and MasterCard, Uber and Lyft, eBay, and Spotify. Founding backers also include venture capital firms like Andreessen Horowitz and Union Square Ventures and non-profit organizations like Kiva and Mercy Corps.


Those non-profit groups reflect one of Facebook's selling points for Libra: that it's trying to create an open, global financial network that will be accessible to people in the developing world.


"Access to financial services is limited or restricted for those who need it most—those impacted by cost, reliability, and the ability to seamlessly send money," the Libra white paper argues. "All over the world, people with less money pay more for financial services."


Technically, the Libra network will be a permissioned, blockchain-like network. Each of the project's 27 members (a number Facebook hopes to expand to 100 by next year) will run a network node that processes and verifies network transactions.


The Libra Association says it aims to eventually open this up to anyone who wants to participate, but it says the technology just isn't there yet. Existing blockchain networks are way too slow for a mainstream global payment network. However, Facebook says that anyone will be free to build software on top of the Libra network.


Facebook says it won't control the Libra network once it launches. Governance decisions will be made by a vote of Libra Association members, with Facebook's vote carrying the same weight as other Libra Association members.


Facebook and the Libra Association released a lot of information on Tuesday morning, and I haven't read it all. There's a new programming language called Move that's optimized for secure smart contracts. There's an in-depth explanation of the Libra blockchain. And there's more information about how Libra's peg to conventional currencies will work. Stay tuned for a much deeper dive into Facebook's ambitious new platform in the coming days.




Source: Facebook launches cryptocurrency with Visa, MasterCard, Uber, and others (Ars Technica)

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