What’s Going On Here?

After six months of anticipation, Facebook finally spilled the beans on its forthcoming Libra “cryptocurrency”.

What Does This Mean?

• Facebook (inspired by the success of Chinese giants like WeChat), wants to create a global financial network – but with its own brand-new currency.
• Libra is scheduled for launch in 2020 via a new subsidiary and app called Calibra, and Facebook is partnering with over two dozen companies on the project – including payments giants Visa and Mastercard. Keep your friends close…
• The group will together be responsible for governing Libra. But the very presence of a governing association goes against the independent blockchain concept central to cryptocurrencies – which may be why Facebook’s founder has been careful to avoid any use of the word.

Why Should I Care?

For you personally: Brave new bitcoin.

• Libra is billed as allowing the world’s 1.7 billion unbanked, 2/3 of whom own a mobile phone, to make cheap instant payments. But Libra could also help cost-swamped Facebook make more money from its apps’ two billion daily users, rewarding them for watching ads and buying directly from partners (like Booking.com) – while Facebook takes a lucrative cut.
• Access to transaction data could also prove juicy. But given Facebook’s record on privacy, will anyone trust it with their digital money second time around?

The bigger picture: A new Federal Reserve?

• When the US’s central bank was set up a century ago, many worried that effective control of the world’s monetary policy was being ceded to a private organization. There are similar concerns with Libra – only this time, nobody’s getting to vote on it.
• Facebook says that it’ll keep Libra’s value steady by backing it with billions in real-world currencies. But there’s a risk that this could eventually involve it snapping up most of the world’s foreign exchange trading, and perhaps some government bonds too – with the heightened competition for “safe” investments potentially pushing interest rates even lower.
• Regulators will be watching closely.

Content source: Finimize. (2019) Ad Libra. Available from: https://www.finimize.com/wp/news/ad-libra/ [Accessed 22 June 2019]