Having come under fire over data-privacy scandals and other issues in the recent past, Facebook had been expected to lie low for a while and not do anything that would place the firm at the risk of facing more public and media scrutiny.
Hence, it is bit surprising to hear the social network giant is taking up a grandiose project, involving digital currency, that will surely put the tech entity in the crosshairs of lawmakers and regulators around the world.
On Tuesday, Facebook unveiled plans to launch its own virtual currency, called Libra, that will allow the firm to leverage the billions of users on the group’s platforms for a foray into global payments.
The company announced that it has partnered with more than two dozen organizations around the world to start an entity called the Libra Association that will manage the new digital currency.
Libra’s mission is to create a simple global financial infrastructure that empowers billions of people around the world, Facebook said. Powered by blockchain technology, it will launch in 2020.
“Libra is for everyone. Moving money around the world should be as easy and cheap as sending a text message. No matter where you live, what you do, or how much you earn,” the company said.
Facebook, meanwhile, also revealed the creation of a new unit, called Calibra, which will be tasked with developing applications related to the new digital currency.
Having built a huge social media empire with vast pool of users from every corner of the globe, it’s clear that Facebook is now aiming to become a big player in financial services, possibly shaking up the global banking system.
Facebook and its partners see Libra as a substitute for cash. The company believes the virtual unit will not only power transactions between established consumers and businesses around the globe, it will also help the unbanked population access services for the first time.
The US tech giant has launched a test version of its blockchain, the technology that underpins cryptocurrencies. Open-source software will allow developers to experiment with building applications on the platform and provide feedback.
The Libra project members are suggesting that the new virtual currency will be more than just a bitcoin-like crypto unit. Libra can be a global currency that can be converted into the money people use in their own country, if regulators do not stand in the way.
The partners include card issuers Visa and Mastercard, which should help Libra to connect to the two most popular bank card networks in the world and allow the unit to become a usable currency in the real world.
Another Libra partner is London-based telecoms group Vodafone, which has been quite successful in pushing mobile banking business in developing markets such as India. The Libra concept can help the telco further enhance its mobile banking business globally.
Ride-hailing services firms Uber and Lyft and music-streaming giant Spotify are among the other entities that have linked up with Facebook’s Libra initiative. The firms believe their service users will welcome a new payment tool that wouldn’t require provision of credit card information to third parties.
To make Libra popular, Facebook’s new subsidiary Calibra will build services that will allow users to send, spend and save Libra through a digital wallet that will be available in WhatsApp and Messenger and also as a standalone app.
For Facebook and its partners, Libra represents an ambition to drive financial disruption in the world, and break the dominance of traditional financial institutions in the digital age. But bringing new currency to all people in the world won’t be a simple task.
Facebook will face stiff resistance from governments, regulators and traditional banks in relation to the planned Libra crypto unit.
Data privacy and security will be a big concern, especially as it would involve financial transactions. Given Facebook’s recent data scandals, lawmakers around the world will seek to thwart the firm’s crypto ambitions.
Also, questions will be raised whether a tech giant such as Facebook should be allowed to become even more powerful and put it in a position to abuse its market dominance for financial gains.
Some lawmakers in the US and Europe have already indicated that they will oppose Facebook’s venture tooth and nail.
Right now, it’s difficult to say what would happen, whether Facebook will manage to get its crypto unit off the ground, or whether it will see the plans stymied.
If the firm does succeed in overcoming the potential regulatory hurdles and launches Libra and also pulls off widespread use of the digital unit, we could see Facebook emerge as a financial giant, just like Ant Financial in China.
And it could disrupt the entrenched networks controlled by central banks and traditional financial institutions, and lay the foundation for an alternative financial system.
But the question is: will, and should, the company be allowed to have its way?
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