The social media network says it will launch the currency in 2020 and has pulled together an impressive ecosystem to make it happen.
The Libra Network will allow Facebook’s users around the world make financial transactions online at low cost. Calibra, a digital wallet, will be its first product. Libra was the Romans’ basic measure of weight.
Facebook says it wants to help the 1.7 billion people around the world who haven’t got a bank account. Notably, the Libra Association does not include any banks, nor the other platform giants, Apple and Google.
The Libra Association will develop of the Libra Blockchain and manage the Libra Reserve of Stablecoins. It is “an independent not-for-profit organisation, made up of trusted, geographically diverse companies, NGOs/multilaterals, and academic institutions,” according to a statement. In addition to Iliad and Vodafone, the founding members are:
• Payments: Mastercard, PayPal, PayU (Naspers' fintech arm), Stripe, Visa
• Technology and marketplaces: Booking Holdings, eBay, Facebook/Calibra, Farfetch, Lyft, Mercado Pago, Spotify Technology S.A., Uber Technologies, Inc.
• 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.
Vodafone payments pioneer
Vodafone is a founding member of the Libra Association – which will oversee development and governance – and launched mobile payments and banking in Kenya with its MPESA service for people without bank accounts back in 2007 in Kenya. It has proved an outstanding success.
Since then, other financial services have been added, such as insurance, and the service has expanded into other countries including Albania, Romania, Egypt, India, Ghana, DRC, Tanzania, Mozambique and Lesotho.
It is as yet unclear how or if M-PESA will play into Libra beyond Vodafone’s expertise and experience.
Iliad offers telecoms services in France and Italy. It was founded by billionaire Xavier Niel in 1990.
The company said in a statement, “This project of ‘Internet of money’ matches the DNA of Iliad, whose goal has always been to make digital innovations available to as many people as possible.”
Banking ripe for a shake-up
Libra certainly has the potential to profoundly change the global banking sector, which is already under regulatory scrutiny in many places.
Primary criticisms include high transaction charges, especially if they involve currency changes, and a lack of competition.
However, some regulators are calling for Facebook itself to be broken up on the grounds it has too much market power and concerns about its scant regard for users’ data privacy.
Members of the US Senate expressed concern when rumours of Facebook’s planned financial expansion first emerged and there have been calls for the project to be put on hold.
Stable with reserves
Clearly Facebook and its cohort is keen to head of some criticisms at the pass. The Iliad statement said, “Libra will be backed by a reserve of real assets providing stability and preserving it from speculation” while the Association will provide a governance framework for the Libra Network, facilitate the operation of the blockchain, manage the reserve and help the ecosystem to evolve.
Further, the Association will coordinate the technical roadmap of the Libra Network, preparing for the transition to a fully permissionless blockchain (that is, permissionless governance and automated reserve management). Also, it is to ensure the Founding Members maintain equal roles.
Permissionless networks allow anyone to join and participate (rather like the internet), while the owner of a permissioned blockchain networks decides who is allowed to join.