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This file photo taken on May 1, 2018 shows Facebook CEO Mark Zuckerberg speaking during the F8 Facebook Developers conference in San Jose, California. Image Credit: AFP

San Francisco: Facebook is leaping into the world of cryptocurrency with its own digital money, designed to let people save, send or spend money as easily as firing off text messages.

What is it called? What is it for?

"Libra" — described as "a new global currency" — was unveiled Tuesday in a new initiative in payments for the world's biggest social network with the potential to bring crypto-money out of the shadows and into the mainstream.

The name “Libra” was inspired by Roman weight measurements, the astrological sign for justice and the French word for freedom, said David Marcus, a former PayPal executive who heads the project for Facebook.

“Freedom, justice and money, which is exactly what we’re trying to do here,” he said. Facebook also appears to be betting it can squeeze revenue out of its messaging services through transactions and payments, something that is already happening on Chinese social apps like WeChat.

When would it start working?

Facebook and its partners released a prototype of Libra as an open source code to be used by developers interested in weaving it into apps, services or businesses ahead of a rollout as global digital money next year.

Sending money to your friend shouldn't be harder than getting them an Uber ride home. Libra has the potential to bridge the gap between traditional financial networks and new digital currency technology, while reducing the costs for everyone.

- Peter Hazlehurst, Uber head of payments and risk

Who will look after it?

An eponymous nonprofit association based in Geneva will oversee the blockchain-based Libra, maintaining a real-world asset reserve to keep its value stable.

-28

Facebook partners to launch Libra with an entity based in Geneva.

Facebook has linked with 28 partners in a Geneva-based entity called the Libra Association, which will govern its new digital coin set to launch in the first half of 2020, according to marketing materials and interviews with executives.

What would it do?

The initiative has the potential to allow more than a billion "unbanked" people around the world access to online commerce and financial services, said Libra Association head of policy and communications Dante Disparte.

"We believe if you give people access to money and opportunity at the lowest cost, the way the internet itself did in the past with information, you can create a lot more stability than we have had up until now," Disparte told AFP.

Who are the partners behind Libra?

Libra Association debuted with 28 members: The partners include:

  • Mastercard
  • Visa
  • Visa
  • Stripe
  • Kiva
  • PayPal
  • Lyft
  • Uber
  • Women's World Banking
  • Spotify
  • Others

"Sending money to your friend shouldn't be harder than getting them an Uber ride home," said Uber head of payments and risk Peter Hazlehurst.

"Libra has the potential to bridge the gap between traditional financial networks and new digital currency technology, while reducing the costs for everyone."

What is Facebook's role?

Facebook will be just one voice among many in the association, but is separately building a digital wallet called Calibra.

What about Calibra?

"We view this as a complement to Facebook's mission to connect people wherever they are; that includes allowing them to exchange value," Calibra vice president of operations Tomer Barel told AFP.

"Many people who use Facebook are in countries where there are barriers to banking or credit."

Would Calibra work on FB Messenger and WhatsApp?

Yes. Calibra is being built both into Facebook's Messenger and WhatsApp — with a goal of letting users send Libra as easily as they might fire off a text message.

Is it backed by real cash?

Libra learned from the many other cryptocurrencies that have preceded it, such as Bitcoin, and is designed to avoid the roller-coaster valuations that have attracted speculation and caused ruin.

What relationship would a real-world currency have with Libra?

Real-world currency used to buy Libra will go into a reserve backing the digital money, the value of which will mirror stable currencies such as the US dollar and the euro, according to its creators.

"It is backed by a reserve of assets that ensures utility and low volatility," Tomer said.

What's the technology behind Libra?

For the digital currency to operate on a global scale, Libra is relying on a platform of blockchain technology that uses about 100 trusted computer "nodes" to validate and register transactions.

The Libra Association will be the only entity able to "mint or burn" the digital currency, maintaining supply in tune with demand and assets in reserve, according to Barel.

"It is not about trusting Facebook, it is effectively trust in the association's founding organizations that this is independent and democratic," Disparte said.

What's it it for Facebook? 

The launch comes with Facebook seeking to move past a series of lapses on privacy and data protection which have tarnished its image and spark scrutiny from regulators around the world.

Chief executive Mark Zuckerberg has promised a new direction for Facebook built around smaller groups, private messaging and payments.

The new Calibra digital wallet promises to eventually give Facebook opportunities to build financial services into its offerings, offer expand its own commerce and let more small businesses buy ads at the social network.

"We certainly see long-term value for Facebook," Barel said.

What about Facebook data leaks?

Financial information at Calibra will be kept strictly separate from social data at Facebook and won't be used to target ads, Calibra vice president of product Kevin Weil told AFP.

Libra will be a regulated currency, subject to local laws in markets regarding fraud, guarding against money laundering and more, according to Weil.

"If you look at the state of people using money to do bad things, most of it happens in cash," Weil said.

Facebook says it won’t use Libra data to target ads, but may share data “to keep people safe, comply with the law, and provide basic functionality.” Facebook’s subsidiary, Calibra, is the company’s way of trying to keep the operations separate.

What’s a cryptocurrency anyway?

It’s a form of digital cash that uses encryption technology to make it secure. Cryptocurrencies exist not as physical bills or coins but rather as lines of digitally-signed computer code. Records are typically kept on ledgers known as “blockchain”.

People can store their cryptocurrency stashes in virtual wallets that resemble online bank accounts.

Why not use Bitcoin?

Although Bitcoin has gotten a lot of attention, it isn’t widely used. For one thing, its value fluctuates wildly, meaning that $100 in bitcoins today might be worth $300 a month from now — or $2.50. Only a handful of merchants accept bitcoins as payments.

Facebook, and its partners, are hoping to keep Libra’s value stable by tying it closely to established currencies. Unlike most other cryptocurrencies, the Libra will be backed by real-world bank deposits and government securities in a number of leading currencies.

Facebook is also recruiting partners ahead of time, with 28 big firms supporting it — incluing Mastercard, Visa, PayPay, Uber and Lyft. They’ll also help fund, build and govern the system. That’ll make Libra less of a free-for-all than Bitcoin. Facebook says Libra will embrace regulation, but it isn’t providing many details on how.

With most cryptocurrencies, including Bitcoin, anyone can lend computing power to verify transactions and to prevent anyone spending the same digital coin twice. With Libra, the verifications will initially be managed by its founding companies, such as Facebook and PayPal. Facebook believes the closed approach will mean better security.

Are cryptos anonymous?

Although it’s possible to trace bitcoins and some other cryptocurrencies as they are spent, owners of accounts behind the transactions aren’t necessarily known. That makes such currencies a favourite among certain cybercriminals. But it is sometimes possible to tie cryptocurrency transactions to a real person who has cashed out digital coinage into a traditional currency.

And if someone spends libras while logged onto Facebook, it’s theoretically possible Facebook could tie it back to a real person. Facebook says it won’t be able to see this data when someone uses a third-party wallet, although it hasn’t yet explained why that is.

Facebook says it won’t use Libra data to target ads, but may share data “to keep people safe, comply with the law, and provide basic functionality.” Facebook’s subsidiary, Calibra, is the company’s way of trying to keep the operations separate.

How would Libra work for people like you and me?

For people without access to banks, local money could be swapped for Libra at traditional currency exchange houses or businesses offering such services.

And the ubiquity of smartphones means digital wallets for Libra could make banking and credit card services and e-commerce available in places where they don't now exist.

Would Libra change the world?

Analyst and cryptocurrency investor Lou Kerner said Facebook's move has the potential to open the door for cryptocurrency to a wider public.

Kerner wrote in a recent blog post that cryptocurrencies are essentially loyalty points and that a broad use of such digital money could be "a revolutionary tool" to expand the use of these kinds of digital "tokens."

"Facebook can create the world's first scaled token economy, and we can all learn from their experience," Kerner said. "That's why I think the Facebook coin could be a watershed moment in crypto."