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Facebook to launch 'Libra' cryptocurrency

  • 18 Jun 2019

Social media giant hopes to offer unbanked consumers access to financial services for the first time but consumer privacy concerns or regulatory barriers may present significant hurdles.

Facebook has also created a subsidiary called Calibra, which will offer digital wallets to save, send and spend Libras. ( Reuters Archive )

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.

'Freedom, justice, and money'

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 shares were the most actively traded across US exchanges in pre-market trading, gaining 2.6 percent to $194.

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

Public backlash

The Libra announcement comes as Facebook grapples 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.

Markus Feber, a senior German lawmaker in the European parliament, called for the European Union to begin work on regulating cryptocurrencies.

"If Facebook will expose its two billion users to the risks of virtual currencies, this would be a good reason for the European Commission to start work on a proper regulatory framework governing the rules of virtual currencies," he said in a statement.

Engaged with regulators

Facebook has engaged with regulators in the US 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 publicising 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," he said. "We're eager to do that."

The Swiss financial watchdog FINMA said it was in contact with the initiators of the Libra project. It declined to comment on whether the project was in the process of obtaining specific regulatory permission or status.

Britain's financial regulator declined to comment. Other major regulators did not immediately respond to requests for comment.

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