Facebook on Tuesday announced that it will launch a digital currency called Libra by 2020.
It is a currency that will operate on Facebook's own version of blockchain technology.
A new Facebook subsidiary, Calibra, was formed to provide financial services. Caibra’s first product will be a digital wallet for Libra.
“The wallet will be available in Messenger, WhatsApp and as a standalone app — and we expect to launch in 2020,” Facebook said in a release.
The blockchain technology used by Libra is the similar encrypted technology used by other cryptocurrencies or digital currencies.
But unlike cryptocurrencies, Libra will not be mined but will have to be bought by customers. The Libra blockchain is still under development.
Calibra will allow transfer of Libra to anyone through a smartphone “as easily and instantly as you might send a text message and at low to no cost.”
Through a downloaded app, Facebook not just wants users to conduct transactions on the app itself, but use the service, in time, to pay bills, buy a cup of coffee or ride a public transit.
Facebook is one member of the Libra consortium. The 28 founding partners include Uber, Lyft, PayPal, Spotify, eBay, Visa and Mastercard, among others. Although a team of Facebook created Libra, a Swiss non-profit based in Geneva will see the final design being put into place.
The value of Libra will be backed by a financial reserve – such as the dollar, euro and yen – for added stability. To keep the money safe, the company assured, that it will have the “same verification and anti-fraud processes that banks and credit cards use”.
When it comes to privacy, Facebook has been accused of exploiting and recklessly using user data. The social media giant, in the official release, reiterated that a customer’s account information and financial data will not be used to improve ad targeting on Facebook's family of products.
“To earns people’s trust, we are going to have to make commitments on privacy ensuring that financial data and social data never get co-mingled,” Facebook’s head of Calibra David Marcus told CNBC TV.
Facebook said that for billions of people even basic financial services are still inaccessible and the new service would help mitigate the cost of financial exclusion.
If Libra works as intended, a customer will be able to send Libra to anyone in the world. The services, however, will be limited in places with restrictions on social media, such as China and Iran.