Finance

Libra: the latest news on Facebook’s future cryptocurrency

Libra is the name given to Facebook’s future crypto-currency. “Libra’s mission is to develop a simple global currency and financial infrastructure, serving billions of people,” the project’s white paper, which was revealed on June 18, 2019.

The libra will be a cryptocurrency that depends on a set of stable fiat currencies: 50% the dollar, 18% for euro, 14% for the yen, 11% for the pound sterling and 7% for the Singapore dollar. It will therefore be a stable wedge, i.e. a stable cryptocurrency. For example, if the price of Bitcoin is 10,000 and you exchange 1 Bitcoin for libra, you will have 10,000 units of libra. If the price of Bitcoin drops to5,000, you will still have $10,000 in libra. In addition to being stable, the Facebook crypto will be exchanged instantly because it will not need to go through the banking network.

Faced with the concern of governments and regulators around the world, who are afraid of losing their monetary sovereignty, the Libra association has decided to also create stable, single-currency-backed cards, as revealed in the second version of its white paper in April 2020. There will therefore be a libra and a libraUSD, a libraEUR, a libraGBP and a libraSGD. “We hope to work with regulators, central banks and financial institutions around the world to expand the number of stable corners on the Libra network,” the updated white paper says.

The various libras will be able to be exchanged between Internet users in the same way that peer-to-peer money transfers are now possible via applications such as Lydia, Pumpkin or PayPal. To do so, it will be possible to exchange books via an application created by Facebook: Calibra. It is in fact a wallet that will allow to buy, sell and store the crypto of Facebook. Finally, it will also be available via the platforms of Facebook, WhatsApp and Messenger. In total, more than 2.7 billion people each month use at least one platform in the group’s ecosystem (Facebook, Instagram, Messenger and WhatsApp). The libra will also be used to pay for purchases at partner merchants. Currently, these include Uber, Spotify, Lyft and Iliad. As far as transaction fees are concerned, they are likely to be low. “The interest earned on the reserve’s assets will be used to cover the costs of the system, to ensure minimal transaction costs, to pay dividends to investors who have provided capital to launch the ecosystem, and to sustain its growth and adoption over the long term,” the white paper says.

The Libra blockchain

The crypto-currency libra is based on a “permission” blockchain, which means that access to the protocol must be validated, unlike bitcoin, a public blockchain, open to all. Facebook wants the blockchain to be permission-free in the long run, but this is not possible because “there is currently no proven solution that can provide the scale, stability and security to support billions of people and transactions around the world in a network without permission,” it says in the June 2019 presentation document. In the April 2020 submission, it states: “We believe that it is possible to replicate the key economic properties of an unlicensed system through an open, transparent and competitive marketplace, while incorporating the member and validator due diligence that is inherent in a licensable system”.

Behind this project, there is a whole team set up in May 2018, headed by Frenchman David Marcus, former vice-president of Messenger and ex-president of PayPal (2012-2014). Marcus, who is well-versed in the payment industry, was a member of the board of directors of the American crypto-currency exchange platform Coinbase. He stepped down from this position due to conflicts of interest. According to our information, corroborated by CNBC, there are currently 100 people working on the project.

Libra’s partners

Here is the list of the partners of the Libra association, which tends to move regularly, to the rhythm of the entries and exits of some of them:

  • Anchorage (crypto-currency)
  • Andreesen Horowitz (management company)
  • Bison Trails (blockchain)
  • Breakthroug Initiatives (research)
  • Checkout.com (payment)
  • Coinbase (crypto-currency)
  • Creative Destruction Lab (start-up program)
  • Facebook/Calibra (payment)
  • Farfetch (e-commerce)
  • Heifer International (NGO)
  • iliad (telecom)
  • Kiva (ready)
  • Lyft (mobility)
  • Mercy Corps (NGO)
  • Paradigm (management company)
  • PayU (payment)
  • Ribbit Capital (management company)
  • Shopify (ecommerce)
  • Slow Ventures (management company)
  • Spotify (entertainment)
  • Tagomi (crypto-currency)
  • Temasek (sovereign wealth fund)
  • Thrive Capital (management company)
  • Uber (mobility)
  • Union Square Ventures (management company)
  • Women’s World Banking (NGO)
  • Xapo (crypto-currency)
  • Regulators and the libra

References

Taskinsoy, J., 2019. Is Facebook’s Libra Project Already a Miscarriage?. Available at SSRN 3437857.

Libra.org. (2019). Libra White Paper | Blockchain, Association, Reserve. [online] Available at: https://libra.org/en-US/white-paper/.‌

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