Facebook has recently announced that it will be launching its own currency, with the promise of it being fully operational by 2020. This currency is not exactly classifies as a cryptocurrency, due to the fact that the value of Libra will be backed by a reserve. This is unlike regular cryptocurrencies, whose value is determined by the supply of the currency and other forms of cryptocurrency in the market as well as their individual demands.
This financial platform is intended to also be regulated by a federation of companies and non-profit organisations through a Swiss foundation.The currency is quickly gaining traction, with investors minimum contribution being $10m. Some companies that have currently invested in this Facebook currency are Visa, MasterCard, PayPal, Uber, Spotify and some venture capital firms such as Andreessen Horowitz.
Facebook is intending to have this currency be distributed through some existing apps such as Facebook Messenger or WhatsApp. These apps could make it hard to integrate a secure type of funds exchange, and would not provide a viable platform for many businesses to feel comfortable doing business through.
The main purpose of this new currency as far as Facebook is concerned is uniting users from all over the world with the same type of currency. Their goal is to provide a secure area for people to save their money, especially in places where the central bank is extremely weak. According to the World Bank’s Global Findex database, 1.7 million people are not provided the tools necessary to have a proper banking experience.
One part of this currency that would be extremely beneficial is the elimination of international transfer or conversion fees, giving the international market a global platform of possible consumers that makes buyers are more comfortable to utilize international brands without fear of fees.
This idea of cryptocurrency is far from new, and although many huge US companies have felt strongly enough to invest, there is little information as to how a consumer would expect this type of exchange to occur. Additionally, if in every place the currency is the same value, how would each country’s exchange rate of actual currency differ?
How would countries without a strong central banking system even be able to transfer their funds into Facebook currency? There are many questions that have yet to be answered about the logistics of this new financial development, but one thing is for sure, banks all across the world are watching. And perhaps they are a bit intimidated by what the future holds.