After months of anticipation, the designers of a new digital currency backed by Facebook said they plan to launch their product as early as next year.
Calibra, a newly formed Facebook subsidiary, says its goal is to provide financial services to billions of people around the world who lack access to banking, a large portion of whom are women in developing countries. The toll is a heavy one: About 70 percent of small businesses in developing countries don’t have access to credit, Facebook said, and $25 billion is lost by migrants every year through remittance fees.
That currency — known as Libra — will be kept in a digital wallet that will be available in Messenger and WhatsApp, as well as a stand-alone app, developers say. With 2.4 billion users around the world, Facebook’s goal is to bring cryptocurrency into the mainstream, even as the company draws sustained scrutiny for its handling of user data.
Developers say the currency’s name, Libra, was inspired by the Roman unit of weight measure, the astrological symbol for the balance of justice, as well as the French word for freedom: “liberté.”
“Money, justice, and freedom really is the spirit of this new project,” said Dante Disparte, head of policy and communications for the Libra Association.
The idea is simple but revolutionary: to make transferring money as easy as sending a message on Facebook, a digital space where billions of people already conduct personal business among family members and friends, developers say. In time, Facebook hopes to roll out additional services through Calibra, such as paying bills with one click, buying a cup of coffee with the scan of the code or even using the currency to ride public transit.
“From the beginning, Calibra will let you send Libra to almost anyone with a smartphone, as easily and instantly as you might send a text message and at low to no cost,” Calibra said in a statement.
It’s a pitch that comes as Facebook has come under repeated fire from users and lawmakers over privacy and security concerns. Some 2020 presidential candidates have railed against Facebook, saying it may violate antitrust law.
Facebook said it won’t share account information or financial data with Facebook or any third party without a users’ consent — meaning that account information can’t be used to improve Facebook’s ad strategy.
When it comes to keeping users’ money and information secure, Facebook said it will use the same verification and anti-fraud processes used by banks and credit cards, along with automated systems to monitor activity and detect fraud.
Kevin Weil, Calibra’s vice president of product who formerly oversaw Instagram Stories, Facebook’s own iteration of Snapchat, acknowledged that it may take time for the social media giant to gain the trust of the currency’s potential users, though he also noted that trust of Facebook varies widely around the world.
To improve that trust, he said, Calibra will include real-time, messaging-based customer service, where users can address problems with their account or even begin by asking basic questions about how the currency works.
“Your social data on Facebook is kept separate from Calibra data,” Weil added. “This is not about improving ad targeting. We’re trying to draw a bright red line.”
Along with Facebook, Libra is backed by 28 companies and nonprofits that include finance and tech giants such as MasterCard and Uber.
Libra is run by Facebook’s version of the blockchain, the encrypted technology used by cryptocurrencies such as bitcoin. Cryptocurrency has gained traction with such financial powerhouses as JPMorgan, Fidelity and the New York Stock Exchange as investors show more interest in bitcoin as a way to grow their portfolios.
And while bitcoin has been deemed risky in the past, it climbed to $9,300 on Monday — its highest level in 13 months. Bitcoin has surged 148 percent this year, with analysts telling CNN that Facebook’s expected announcement of its own cryptocurrency platform helped drive bitcoin’s price this week.
Facebook’s stock jumped on the announcement, climbing more than 2 percent in premarket trading on Tuesday.
Cybersecurity and privacy expert Mike Chapple, an associate teaching professor of information technology, analytics and operations at the University of Notre Dame’s Mendoza College of Business, said that while the price of bitcoin is determined by market demand, leading to enormous volatility, Libra is backed by a financial reserve that mixes the world’s major stable currencies. That stability, he said, should offer the currency utility for consumers rather than a gamble for investors.
Because Libra is “user-friendly,” Chapple continued, it won’t require the specialized software or technical savvy required to purchase cryptocurrencies like bitcoin.
“The potential trade-off, however, is privacy,” Chapple said. “Libra’s design does leverage the blockchain, preserving the privacy of transactions from outsiders peering in, but the facilitation role played by Facebook and other partners leave the company the ability to penetrate that veil of privacy.”
“While Facebook promises that they won’t access information from the currency’s digital wallets ‘without customer consent,’ there are no technical barriers to them doing so,” he added. “As with many technological innovations, Libra offers us a trade-off between privacy and convenience.”