Date
23 July 2019
A Facebook team led by former PayPal president David Marcus is building an asset-backed cryptocurrency that can be transferred across borders without transaction fees. Photo: Reuters
A Facebook team led by former PayPal president David Marcus is building an asset-backed cryptocurrency that can be transferred across borders without transaction fees. Photo: Reuters

Uber, payment firms back Facebook cryptocurrency: WSJ

The tech community is abuzz with reports that Facebook is unveiling its own cryptocurrency.

And several well-known firms, including ride-hailing giant Uber as well payment companies Visa, Mastercard and PayPal, have thrown their support behind the social media giant’s blockchain-based payment network, the Wall Street Journal reports.

Facebook’s digital token, according to reports, is designed as a “borderless currency” which users can transfer across borders without transaction fees.

The social network is said to have been courting dozens of financial institutions and tech companies to join an independent foundation that will help govern the digital currency and contribute capital for its development.

Third-party organizations, contributing as much as US$10 million each, will obtain the privilege to act as “nodes” on the payment network for Facebook’s cryptocurrency, with the computing power necessary to validate transactions by resolving complicated mathematical equations.

Visa, Mastercard, PayPal, and Uber are among firms that will invest around US$10 million each in the consortium, called “Libra”, WSJ said, citing sources familiar with the project.

San Francisco-based payments platform Stripe, online travel giant Booking.com, and Argentina-based e-commerce site MercadoLibre are also participating in Facebook’s cryptocurrency project, the newspaper said, without mentioning the specific roles they will play.

According to reports in early June, Facebook intends to launch a network with 100 nodes, generating US$1 billion in licensing fees.

The funding will be used to create a basket of fiat currencies and low-risk securities from different countries, and would serve as collateral to back the “stablecoin” associated with the payments network.

Facebook plans to unveil its new cryptocurrency as soon as next week and launch the payment network next year.

The stablecoin will be used for money transfers over its messaging infrastructure – WhatsApp, Instagram, and Facebook Messenger. It will be underpinned by blockchain technology and pegged to the US dollar.

Unlike other cryptocurrencies, stablecoin is pegged to real-world assets with set prices – currencies, oil, etc. – to help combat price volatility.

Last week, TechCrunch reported that Facebook has set for June 18 the release of a white paper explaining the cryptocurrency’s basics and other details, and is targeting a formal launch in 2020.

As for the practical uses of the new cryptocurrency, BBC suggested that Facebook may also forge links with retailers and online merchants to allow users to purchase discounted goods using the cryptocurrency.

Retailers will also benefit from such an arrangement by cutting out credit card companies from the processing of payments.

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BN/CG

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