Facebook’s New Currency May Change the Way the World Uses Money
Facebook wants to redefine the way the world uses money. The social media giant recently announced that it would be launching its own form of Cryptocurrency, Libra. With 2.4 billion users, Facebook has an incredible built-in user-base to target.
What is Libra and will the concept even make it to a 2020 launch? And if it does launch will it be safe? Here are the top things you should know about Facebook Libra.
What is Facebook Libra
Libra is a cryptocurrency being developed by Facebook; it’s a type of currency that has no physical form. You won’t be able to carry Libra coins in your physical wallet, only in an online digital wallet. The goal is to be a rival to Bitcoin, the most popular Cryptocurrency around today. Libra would allow people to send and receive money quickly with nominal fees, no bank account needed.
Since it’s not tied to a bank and it’s anonymous, it’s an excellent option for people with little or bad credit. Facebook hopes to use Libra to reach the under-banked population who either can’t or choose not to store their money in a traditional bank.
Why does Facebook Care about Cryptocurrency
The social media company isn’t new to the idea of online currency. It used to have an online currency called “Credits” that allowed users to purchase items within Facebook games. Does anyone remember Farm Town?
There’s also ease of use that comes with digital currency. Mark Zuckerberg said in April, it “should be as easy to send money to someone as it is to send a photo.”
Launching Libra could serve as a way for Facebook to reinvent itself amid concerns that it’s dying out among Millennials and Generation Z. By creating a digital currency, the company has created another reason for people to stay on their platform.
How is it different than Bitcoin
Bitcoin is the Cryptocurrency that most people have heard of, even though they may never have used it. It’s frequently in the news due to its volatile swings in worth; it fluctuated between $1,914 and $19,245 in the past two years.
The reason Bitcoin rarely holds steady is that it’s not backed by actual assets; its rate is based only on speculation.
Libra will be different. It will be backed by real physical assets that will create a more stable rate. According to CNN.com, “Libra will be backed 1:1 by a reserve “basket” of fiat currency bank deposits, including the dollar, euro, and Japanese yen, and government securities.”
Libra will also have a non-profit group backing it, the Libra Association. The association currently has 28 members with a goal of 100 members by launch. Several of the members are recognizable names, such as Visa and Paypal. The goal is that each member will place $10 million in assets in the Libra Association reserves. With 28 members, Libra will be starting with $280 million, and that number may grow to $1 billion if they reach their 100-member cap.
Can we trust Facebook with Libra
Critics, including lawmakers and regulators, have concerns.
Facebook has been attending Congressional hearings all summer to try and help the government understand the impact on the global economy. When you’re a platform used regularly by 2.4 billion people, you can imagine the effect a successful launch may have on other world currencies.
Due to the anonymous nature of Libra, some members of government, such as Steven Mnuchin, are worried that it may be used for human trafficking. Also, Jerome Powell, Federal Reserve Chairman, warned that it “raises many serious concerns regarding privacy, money laundering, consumer protection, and financial stability.”
On its part, Facebook has said it’s willing to cooperate fully and delay its early 2020 launch if it’s deemed needed.
Facebook has the brand recognition, user-base, and significant financial backers to launch Libra. Whether they’re able to launch in a way that leads to a stable, semi-regulated currency is still up for debate.
With the growing number of concerns from governments and the financial sector, Facebook will likely push back the launch at least to 2021, maybe even later. Their current plan to launch in 2020 is ambitious and critics are vocal in that arena.
If Libra does launch, it will hopefully make access to banking easier for those who are unable to use traditional methods. Time will tell.