All You Need to Know About Facebook's Upcoming Cryptocurrency

Before reading this article, I invite you to read my earlier take called The Facebook Coin, which was published around 1.5 years ago. Many of some quick thoughts expressed there will probably soon become a reality.

Social media giant Facebook will very soon reveal details about its cryptocurrency codenamed Libra (which has been in development for at least 1 year), “a simple global currency and financial infrastructure” meant to reach billions of people. It is currently scheduled for a June 18th release of a whitepaper explaining its crypto’s basics and all underlying bits and pieces of the project.

As reported by The Block, Libra will be built on the Libra Blockchain a “secure, stable, and reliable blockchain” and backed by Libra Reserve, “a reserve of real assets” that will provide the cryptocurrency with “stability, low inflation, global acceptance, and fungibility.”

The introduction of Libra could potentially unlock a new era of commerce and payments for the social network. It could be used to offer low to no-fee payments between friends and family or remittances to migrant workers abroad who are often overcharged by money transfer services.

Libra will be a simple global currency and financial infrastructure meant to reach billions of people. Libra will be built on the Libra Blockchain, a secure, stable, and reliable blockchain and backed by Libra Reserve, a reserve of real assets that will provide the cryptocurrency with stability, low inflation, global acceptance, and fungibility.

Circumventing credit card transaction fees could also allow Facebook’s crypto to offer a cheaper way to pay merchants online, facilitate microtransactions, support content creators and much more. More importantly, a better understanding of who buys what or which brands are popular could aid Facebook in ad measurement, ranking, and targeting to amplify its core business (making it even more important player in the global world). Sounds too good to be true? Let us see.

By the way, Ads right now constitute more than 95% of all Facebook's revenue, with payments and other services making a mere 1.5%. Controlling the whole financial ecosystem might be a game-changer both for the company and social world as such.

What is Known about Facebook’s Cryptocurrency

Project: Facebook will likely use the Libra codename as the public facing name for its cryptocurrency. Facebook in May this year has registered a company called Libra Networks in Geneva, Switzerland, for financial services. Libra could be a play on the word LIBOR, an abbreviation for the London Inter-bank Offered Rate that is used as a benchmark interest rate for borrowing between banks. LIBOR is for banks, while Libra is meant to be for the people. Well played, right?

Token: The cryptocurrency will be a stablecoin* by nature — a token designed to have a stable price to prevent inconsistencies and hurdles due to price fluctuations during a payment or negotiation process. According to some sources, Facebook has spoken with various institutions (more - below) regarding contributing capital to form a $1 billion basket of multiple international fiat currencies and low-risk securities that will serve as collateral to stabilise the price of the coin. Facebook is working with various countries to pre-approve the rollout of its stablecoin.

Use case(s): Facebook’s cryptocurrency will be transferrable with zero fees via Facebook products including Messenger and WhatsApp, maybe later – also Instagram. Facebook is working with merchants to accept the token as payment, and may offer sign-up bonuses. There are sources claiming that Facebook also wants to roll out physical devices for ATMs so users can exchange traditional assets for the cryptocurrency. Being a dominant player in the online world, that would be quite a push.

Team behind: Facebook’s Blockchain Project is managed by former PayPal President and now VP of Facebook Messenger David Marcus. His team includes former Instagram VP of Product Kevin Weil, Facebook’s former Corporate Head of Treasury Operations Sunita Parasuraman who will reportedly oversee the token’s treasury, and many other elite engineers. 

Governance: Facebook’s cryptocurrency will be governed by a consortium of firms known as the Libra Association, which includes the likes of Visa, Mastercard, and PayPal. According to The Block, Facebook charged each member $10 million to manage their own node, which allows members to access and view the network. Originally the company had ambitions to get Wall Street involved, but found a lack of interest among institutional giants like Goldman Sachs and JPMorgan. It is being speculated that the social media giant is still looking to have 100 members in the governing association.

Facebook charged each member $10 million to manage their own node, which allows members to access and view the network.

Thus, the funding from the consortium members will back the coin, which will be pegged to a basket of currencies. If successful, Facebook could net $1 billion from the 100 companies it hopes to include in the project. Each of these nodes will also reportedly get a seat in the Libra Association as node operators, sending a representative to the consortium.

Below is the map of Facebook’s Libra Association, broken out by industry:

Do We Need This?

Facebook earlier this week in a post also noted that while some cryptocurrency projects have aimed to “disrupt the existing system and bypass regulations,” the firm believes “collaborating and innovating with the financial sector, including regulators and experts across a variety of industries, is the only way to ensure a sustainable, secure, and trusted framework underpins this new system.”

This sounds fair enough, yet the question I would ask is this – is Facebook the best company to execute this strategy? 

I don’t know. What do you think???????

*stablecoin - it is a term used in crypto world to describe cryptocurrencies meant to hold stable values. For example, Tether (USDT) is a blockchain based asset meant to trade for $1 USD. Tether is a “price-stable cryptocurrency” that is “pegged” to the U.S. dollar.

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P.S. You might enjoy my earlier pieces as well:

?? Following Dirty Money

?? The Biggest Deals in FinTech History are Taking Place NOW

?? Bitcoin is NOT a Currency, and Never Will Be

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About: I am a business developer, sales professional, FinTech strategist, as well as Cryptocurrency and Blockchain enthusiast. I'm highly passionate about Financial Technology and Digital Innovation, and strongly believe that it will change the world for the better. Apart from my daily job at a global payments startup where I'm leading company's expansion into Europe , I'm an active member of FinTech community and a TechFin evangelist.

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