By Nicolas
Facebook CEO Mark Zuckerberg has a severe case of crypto fever.
Zuckerberg’s $538 billion social network on Tuesday announced plans to create a new digital currency and financial system that it claims will revolutionize banking.
Facebook announced the new currency, called Libra, in a 12-page white paper that promised vast improvements on bitcoin and other volatile digital coins.
Facebook said it aims to make Libra more stable than bitcoin — and therefore more attractive to everyday users — by linking the coins to hard assets, including short-term government securities. Consumers can then use the e-coins to make purchases around the world or send money to friends and family, without attaching it to their identity, Facebook said.
The tech giant plans to profit from Libra through Calibra, a digital wallet it is building to store and exchange the currency. The wallet will exist as a standalone app as well as in Facebook products like WhatsApp and Messenger.
Facebook said it expects Libra will be especially attractive for people without bank accounts because transactions won’t come with onerous fees. The company declined to say what the fees will be, however, or whether users will be able to buy Libra with cash.
Creating a globe-spanning currency — one that could conceivably threaten the privacy of users and the ability of governments to trace illegal transactions, among other risks — could heighten regulators’ interest in the social network. Facebook is already under federal investigation over its privacy practices and faces a new antitrust probe in Congress.
Governmental scrutiny may be one reason the social network won’t control the currency it is building. Facebook says it will have one vote on a managing board that will also include Uber, PayPal and Visa, as well as partners from blockchain and telecom.
Facebook and its partners are forming a nonprofit called the Libra Association, headquartered in Geneva, that will oversee the new currency and its use. The association will be regulated by Swiss financial authorities, Facebook said.
Facebook also insisted that users’ financial information from their digital wallets will not be used for ad targeting on Facebook’s platforms because the two divisions will be kept totally separate.
Facebook says that Libra’s value will be more stable than bitcoin, which has seen its price fluctuate wildly in recent years, because each Libra will be backed by a reserve fund of real-world money.
This reserve fund will help generate interest for Facebook and the currency’s other backers because the more people who sign up and buy Libra, the more money the backers can make.
The new currency is already drawing interest from Zuckerberg’s old rivals Tyler and Cameron Winkelvoss — the twins who famously sued their former Harvard pal for stealing the idea for the social network from them.
The Winkelvoss twins, who now run their own astrology-themed cryptocurrency exchange called Gemini, told CBS “Sunday Morning” ahead of the announcement that they need to be “frenemies” with Facebook in anticipation of the company entering the space.
Bitcoin prices were down 2.4% Tuesday afternoon, at $9,076.83 per coin, but are up 14% over the past week as news of Facebook’s coin leaked.
Shares of Facebook spiked 2.6% on the Libra announcement before finishing down 0.3%, at $188.47.
