The social network Facebook announced on June 18, in association with some twenty international companies, the launch of a cryptocurrency. Called Libra, it will allow users via a stand-alone payment app to make transactions, while also integrating libras payment or payment directly into the Messenger and WhatsApp apps, owned by the led by Mark Zuckerberg. Facebook’s stated goal is to simplify, among other things, international money transfers. “Nearly half of the world’s adults do not have an active bank account and these figures are even higher in developing countries and for women,” the company said in a statement. The cost of this exclusion is high: about 70% of small businesses in developing countries do not have access to credit and migrants lose $25 billion in transfer fees each year.”
To lead the project, Facebook chose David Marcus, a former PayPal executive. And to oversee the launch of this new cryptocurrency, the social network is also launching Calibra, a new subsidiary whose goal is to “provide financial services that will enable people to access the Libra network and participate in its activities,” the company said. Libra, Calibra’s first official product, will be managed by a Geneva-based organization, the Libra Association, which includes Mastercard, Visa, Stripe, PayPal, Uber, Booking, eBay, Vodafone, Farfetch, Lyft, Mercado Pago, Spotify and Iliad, alone French partner.
A GLOBAL BLOCKCHAIN
At a time when many players, both traditional and less traditional, are positioning themselves on international payments, currency transfer and addressing financial inclusion, Facebook is capitalizing on its exceptional audience — 2.38 billion monthly users — to expand their wallet. Libra, which will offer free instant transfer from a smartphone, should gradually be enriched with other features, such as paying bills, purchasing consumer goods or paying a ticket. The broadcast will be global and will be based on blockchain technology. “This blockchain will be open to developers and businesses so they can create new, inclusive financial services products for people around the world. The currency will be backed by a reserve of real assets, guaranteeing low volatility, global acceptance and fungibility,” Iliad said in a statement.
A PAYPAL EX IN The LIBRA
The platform places particular emphasis on securing transactions. “We will use the same anti-fraud and verification processes as banks and card issuers, and we will have automated systems that proactively monitor activities to detect and prevent fraudulent behaviour,” she says. It also indicates the implementation of dedicated support in real time. On the privacy side, it is also reassuring. “Apart from limited cases, Calibra will not share account information or financial data with Facebook or a third party without the customer’s consent. This means that account information and customer financial data will not be used to improve the targeting of ads on the Facebook family of products.”
Cases where data can be shared will involve issues of personal safety and compliance with legislation and regulations. What will be the consequences of this new entrant for traditional banks and other cryptocurrencies, and what will be the legal framework applicable as the new European Payment Directive (DSP2) comes into force on 14 September next? No doubt Facebook is preparing the ground. Libra will be launched in the first quarter of 2020, in a sample of 12 countries.