Facebook has revealed plans for its new cryptocurrency, Libra, which will be available to the public in 2020.
What’s new: The digital coin will be used to pay for products or services on Facebook and its subsidiaries, Instagram and WhatsApp.
What it means for customers: In addition to buying things on Facebook, Libra will be used for international money transfers. Facebook plans to offer a suite of financial services based around Libra, potentially including loans.
Who’s involved: Twenty-seven partner organizations, including tech giants Uber and Lyft, and payments companies PayPal, Visa and Mastercard. Facebook is looking for 100 partner organizations to join, each of which pay $10 million. Each partner will get one governing vote in how Libra operates.
Who isn’t involved: Apple, Google, Amazon and Microsoft. Chinese tech giants aren’t playing ball, either. All the major banks are also on the sidelines. Some banks were hesitant to join due to concerns around regulatory issues.
What regulators are saying: French Finance Minister Bruno Le Maire raised concerns about money laundering and terrorism financing, and asked the G7 finance ministers to prepare a report on Libra for July. The Bank of England called for people to have an “open mind” about technology, but added that Libra will need to be subject to the “highest standards” of regulation.
What it means for cryptocurrencies: Bitcoin’s price rose over US$1,000 this week following a steady stream of leaks about Libra. But today, the coin lost about US$200 in value. Many Bitcoin backers are excited about Libra, hoping it will catapult cryptocurrencies into the mainstream, which will have knock-on benefits for their coins. Libra is a more direct threat to other stablecoins, which are pegged to a fixed asset to reduce volatility. Over US$500 million has been invested in such stablecoins but their success is tied to mass adoption, and Facebook’s user base and 27 partner organizations already give it substantially more reach.
Who’s involved (in Canada): Creative Destruction Lab (CDL), the startup accelerator program started at the University of Toronto’s Rotman School of Management. The CDL will include Libra in its technical training for its blockchain-focused programs. Unlike other partners, CDL did not put up $10 million. Joshua Gans, its chief economist, wrote on Twitter, “CDL and other social impact partners have not and will not invest any money. In order to be a node at a later stage we will likely need a grant to overlay the costs of running a server.”