After a year of secret planning, Facebook announced Tuesday that it's getting into the cryptocurrency business. The new cryptocurrency, called Libra, is expected to be available in 2020, and Facebook has lined up more than two dozen big-name backers so far, reports TechCrunch. Many details are still to be ironed out, but you can almost think of it as a mainstream bitcoin. When people acquire Libra, they'd be able to use it to to make purchases across the internet outside of the normal banking channels and thus without the usual fees. But a key difference is that Libra will be linked to world currencies to help it avoid the wild swings that have plagued bitcoin and other crypto offerings. And it will be run by a Swiss nonprofit entity, not by Facebook itself. Details:
- How it works: Users will buy Libra though "digital wallets." A big one will be set up by Facebook itself and called Calibra, though others will be able to set up their own platforms. Calibra, though, will have an advantage by making it easy for Facebook's user base of more than 2 billion people to get going. See this New York Times primer.
- Example: Among the original partners are Uber and Spotify. They could start accepting Libra as payment, expanding their customer base to what TechCrunch refers to as the "unbanked." The full list of the original "founding members" of Libra, including Visa, Mastercard, eBay, and PayPal, is here.
- Winklevii: Remember the Winklevoss twins, Zuckerberg's rivals from the early days of Facebook? They're now deeply invested in Gemini, a cryptocurrency exchange of their own, but they tell CBS News they're not worried about Libra. "There's so much pie to grow, I mean, at this point, we need to be frenemies," says Cameron. In fact, the Financial Times reports that Zuckerberg held talks with the twins about Libra.
- More stable? Libra "will be pegged to a basket of government-issued currencies" to help keep it stable, per the Wall Street Journal. Also on the credibility front, those who use Calibra would likely have to show a government ID, such as a driver's license, to acquire Libra. That could reduce its use for shady, black-market transactions. Each digital wallet, however, could set up its own verification guidelines.
- Concerns: The big one is privacy, given that Facebook is involved, notes a separate New York Times story. However, Facebook won't actually be running the currency. Instead, a Swiss nonprofit called the Libra Association will govern the coin's use, and Facebook (through its Calibra subsidiary) will have a single vote like the other members. The group's white paper is here.
- Quick take: "This is not bitcoin," observes Kia Kokalitcheva at Axios. "Unlike the pioneering cryptocurrency and many of the other digital-token experiments out there, the goal here is not to supplant the traditional financial system but rather to extend it to serve people without access to conventional banking or stable ... currency."
- Rising tide: Despite the this-is-not-bitcoin sentiment, crypto believers point to this mainstream launch as proof that the bedrock blockchain technology is useful. In fact, bitcoin has been surging again in the last week or so, to above $9,000, as news of Libra has been dribbling out.
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