Facebook to launch Libra cryptocurrency
Facebook has moved into the crypto currency market with plans to launch Libra, a new global currency powered by blockchain technology, which will be available as a payment method on WhatsApp and Messenger
19 Jun 2019
The social media giant has set up a financial services subsidiary, Calibra, to provide financial services that will let people access and participate in the Libra network.
The first launch will be a digital wallet for a new cryptocurrency, Libra, which will be available in Messenger, WhatsApp and as a standalone app and is set to launch in 2020.
The cryptocurrency will have a global reach and with the backing of Facebook, it is likely to bring crypto into the mainstream.
As the company’s first move into the financial services sector, Facebook said that ‘for many people around the world, even basic financial services are still out of reach: almost half of the adults in the world don’t have an active bank account and those numbers are worse in developing countries and even worse for women. The cost of that exclusion is high — approximately 70% of small businesses in developing countries lack access to credit and $25bn (£21bn) is lost by migrants every year through remittance fees’.
From the beginning, Calibra will let users send Libra to almost anyone with a smartphone, as instantly as a text message and at low to no cost.
‘When it launches, Calibra will have strong protections in place to keep your money and your information safe. We’ll be using all the same verification and anti-fraud processes that banks and credit cards use, and we’ll have automated systems that will proactively monitor activity to detect and prevent fraudulent behaviour,’ Facebook said in a statement.
‘We’re still early in the process of developing Calibra. Along the way we’ll be consulting with a wide range of experts to make sure we can deliver a product that is safe, private and easy to use for everyone.’
The entry of a major player like Facebook with mainstream global reach will put pressure on governments and tax authorities to consider more structured rules and tax policy on the use of crypto assets versus fiat currency.
Giles Hawkins, partner in the corporate team at law firm Ashfords said: ‘Libra is very much at the beginning of its journey and will have to overcome intense political and regulatory scrutiny before it becomes mainstream. Yesterday’s immediate political opposition is just the tip of the iceberg of the hurdles that Libra will have to get through before it goes live.
‘The French finance minister is already saying that Libra cannot (and must not) become a replacement for traditional currencies. The regulators will be very concerned about Facebook’s track record on privacy, as well as issues like money laundering and terrorism finance.
‘It is too early to tell whether cryptocurrency will become a viable alternative to fiat currency. That said a number of parallels can be drawn between internet adoption in the late 1990s and the cryptocurrency industry now. Libra could well have the same impact on cryptocurrency as Internet Explorer and AOL had to the internet.’
So far, progress on establishing a robust global regulatory environment for cryptocurrency has been slow and fragmented.
The latest Financial Stability Board (FSB) report into progress on the regulatory approach to crypto assets warned that ‘assessing the significance of potential gaps is challenging, given the rapidly evolving nature of the crypto-asset ecosystem and related risks. A forward-looking approach to monitoring crypto assets could help provide a basis for identifying potential gaps and areas that should be prioritised or focused on’.
The FSB expressed concerns that gaps may arise in cases where such assets are outside the perimeter of market regulators and payment system oversight. To some extent, this reflects the nature of crypto assets, which have been designed to function outside established regulatory frameworks.
‘At the national level, authorities have chosen different approaches and taken various types of actions to address relevant issues,’ the FSB said. ‘In some cases, differences in regulation between jurisdictions reflect different national market developments and differences in underlying legal and regulatory frameworks for the respective financial systems.’
Report by Sara White