Facebook will launch a cryptocurrency next year – backed by the likes of Mastercard, Visa and PayPal – which will allow people to move money from their smartphone.
The currency, known as Libra, has enlisted 28 firms, including Spotify and Uber, who each had to invest a minimum of £8 million to be a founding member.
The Libra Association, an independent not-for-profit membership organisation, wants to attract 100 businesses in time for launch, which it is aiming for the first half of 2020.
Facebook has said it will have “no special role” in governing the cryptocurrency and will manage the reserve equally with a group of big companies.
- What are cryptocurrencies?
Cryptocurrencies are digital forms of money which use encryption to carry out transactions securely and in many cases anonymously between two parties, which many argue make it more secure against fraud.
A key benefit of cryptocurrency is also that they are decentralised, meaning that no one entity controls the currency in contrast to how a central bank controls traditional currency.
The currencies are often built on blockchain networks, a type of digital ledger technology where all transactions are publicly verified and recorded and can not be altered – creating a chain of information and improving transparency.
- Why is Facebook trying to enter the cryptocurrency market?
The two biggest issues for cryptocurrency so far, Facebook argues, have been scalability and volatility. Bitcoin, for example, has seen its price fluctuate violently in recent years as its price is linked to supply and demand.
However, Libra is to be backed by a reserve of assets – including linking it to several international currencies – from a number of central banks in order to keep its pricing stable.
David Marcus, who started exploring blockchain at Facebook a year ago, said Libra has the potential to "provide billions of people around the world with access to a more inclusive, more open financial ecosystem."
The developers have said that launching it through Facebook apps will also make it immediately accessible to more than two billion people globally – the number who use a Facebook app each month.
- How will Facebook's cryptocurrency work?
Facebook will operate its own digital wallet for people to spend Libra, known as the Calibra Wallet, which will be available in WhatsApp, Facebook Messenger and as a standalone app.
Users will be able to send money to each other initially, at low to no cost, the social network said.
Eventually, it intends to open the Calibra Wallet up to additional services, so that people can pay bills, buy goods by scanning a code or accessing public transport.
Account information from Calibra will not be shared with Facebook to improve things like ad targeting, except for “limited cases” where this data may be shared “to keep people safe, comply with the law, and provide basic functionality to the people who use Calibra”, the social network added.
- When can consumers start using Libra?
The full system of Libra and its Calibra digital wallet is expected to launch next year.
When the Calibra wallet for Libra launches, those wishing to use it will need to sign up for an account using a government-issued ID.
Users will then be able to convert their money into Libra and add it to their digital wallet. Once in place, the currency can be used to pay for “everyday transactions, like buying a coffee, buying groceries, or taking public transportation”.
Facebook said initially the new payment system will support peer-to-peer payments between individuals, as well as some other ways to pay for goods and services – for example by scanning a QR code.
- Why are there concerns over Facebook's plans for a new digital currency?