According to a much-anticipated white paper on Facebook’s new Libra, blockchain-powered cryptocurrency:
1.7 billion adults globally remain outside of the financial system with no access to a traditional bank, even though one billion have a mobile phone and nearly half a billion have internet access
The company goes on to explain that access to the internet has become widespread but banking is expensive thanks to fees, remittances, wire costs, overdraft and ATM charges.
Payday loans can charge annualized interest rates of 400 percent or more, and finance charges can be as high as $30 just to borrow $100.
In addition, Facebook explains that existing blockchain solutions have not reached mainstream adoption. Furthermore, they are volatile and lack scalability.
The company then goes on to explain its beliefs:
- We believe that many more people should have access to financial services and to cheap capital.
- We believe that people have an inherent right to control the fruit of their legal labor.
- We believe that global, open, instant, and low-cost movement of money will create immense economic opportunity and more commerce across the world.
- We believe that people will increasingly trust decentralized forms of governance.
- We believe that a global currency and financial infrastructure should be designed and governed as a public good.
- We believe that we all have a responsibility to help advance financial inclusion, support ethical actors, and continuously uphold the integrity of the ecosystem.
Facebook wants Libra to act as the internet of money with the following attributes:
- It is built on a secure, scalable, and reliable blockchain;
- It is backed by a reserve of assets designed to give it intrinsic value;
- It is governed by the independent Libra Association tasked with evolving the ecosystem.
The Libra currency is built on the “Libra Blockchain.” Because it is intended to address a global audience, the software that implements the Libra Blockchain is open source — designed so that anyone can build on it, and billions of people can depend on it for their financial needs.
How will this new digital money work?
The unit of currency is called “Libra.” Libra will need to be accepted in many places and easy to access for those who want to use it.
There is a Libra Association, an independent, not-for-profit membership organization headquartered in Geneva, Switzerland with the following founding members:
- Payments: Mastercard, PayPal, PayU (Naspers’ fintech arm), Stripe, Visa
- Technology and marketplaces: Booking Holdings, eBay, Facebook/Calibra, Farfetch, Lyft, MercadoPago, Spotify AB, Uber Technologies, Inc.
- Telecommunications: Iliad, Vodafone Group
- Blockchain: Anchorage, Bison Trails, Coinbase, Inc., Xapo Holdings Limited
- Venture Capital: Andreessen Horowitz, Breakthrough Initiatives, Ribbit Capital, Thrive Capital, Union Square Ventures
- Nonprofit and multilateral organizations, and academic institutions: Creative Destruction Lab, Kiva, Mercy Corps, Women’s World Banking
The goal for Libra is a stable currency built on a secure and stable open-source blockchain, backed by a reserve of real assets, and governed by an independent association.
The founding members of this association add tremendous credibility to Libra but questions remain about Facebook being involved with what could become a dominant form of currency. Can they be trusted with privacy? Can they be trusted in general? Will this new addition to its platform add to the company’s monopoly power in social networking? Will U.S. and European antitrust regulators take issue with this announcement?
Certainly, a global, accepted cryptocurrency should be welcomed by many, and blockchain fans rejoice, this is the killer app we have been waiting for.
Still, many questions remain about who controls what could become a major world currency.