Facebook has assembled a band of like-minded financial and telecom giants and venture capitalists, to back its own cryptocurrency, dubbed Libra.
Among the companies that will each finance the effort with some $10 million are Visa, Mastercard, Uber, and PayPal, writes the Wall Street Journal, citing well-informed unnamed sources.
But the target investment figure is allegedly one billion dollars, and more backers, teaming up into the Libra Association, may join the project.
Facebook itself has chosen not to comment on these reports.
The new cryptocurrency, said to have been in the works for over a year, will be officially announced next week in a white paper that’s expected to be co-signed by the Libra Association members, and then launched in 2020, the report continued.
According to WSJ, Facebook plans to offer the digital currency to its 2.4 billion users who could use it to shop on and off the social media platform. If this were to happen, it would immediately boost the use of cryptocurrencies, which is now said to be low, even a decade after Bitcoin was first launched.
Speaking of which – WSJ’s sources said Facebook’s Libra will avoid the volatility of Bitcoin and other cryptocurrencies currently in the market by “pegging it to government-issued currencies.”
But these sources with knowledge of the project also revealed a degree of confusion and uncertainty inside the camp of Libra’s backers, who don’t know either how the digital currency will “work” or what they will be tasked with doing. But it seems that a new payments network will emerge from this enterprise. The report suggested that the motivation of established systems like Visa and Mastercard to enter the Libra Alliance was to keep a close eye on Facebook. This is because of persistent fears in the industry that their card business might one day be undermined by a tech company coming in with an alternative payment system.
And where there is Facebook, there is also an increased likelihood of regulatory scrutiny. Two sets of concerns are crystallizing here: that of investors, who fear Libra – like its older crypto counterparts – might become a favorite currency for illegal activities, such as terrorism and money laundering.
Then there is Facebook’s severely tarnished image when it comes to privacy. Worries might easily and quickly emerge about what the company will do once its own cryptocurrency allows it to track the shopping habits of its billions of users much more efficiently than before.
This kind of tracking is a valuable practice for social and tech companies who earn their money by monetizing user data and behavior – and it’s hard to imagine they would pass any opportunity to use it.
It was revealed recently that Google tracks almost every purchase its users make, thanks to receipts sent to Gmail accounts – and this concerns purchases made not only online, but offline, too. This kind of tracking allows for better targeting of users with advertisements and is in itself a very valuable “currency” for the ad giants.
The way Facebook intends to deal with any criticism on privacy grounds – and in regulators’ interest – is by formally separating itself from the Libra network. WSJ writes that neither Facebook nor “individual members” of the Libra Association will “directly” control the cryptocurrency.
“Yet Facebook, as the developer of the underlying technology, could exert considerable influence over it,” noted the report.
And some observers have said that participation of a giant like Facebook and the attention it is bound to attract from the government may also result in more financial regulation of the cryptocurrency market in general.
Facebook’s decision to now reportedly involve itself so directly in the world of cryptocurrencies is a far cry from not wanting anything to do with them – and in fact, actively suppressing their promotion on the platform that has massive reach.
The social media giant in early 2018 moved to ban all cryptocurrency ads, citing concerns over its users’ well-being.
Namely, Facebook said at the time that it was worried users might fall victim to “scams and deception” if they viewed such ads, urging them at the same time to help police the platform and report if saw any such ads.
Facebook also charged that many companies were at the time – as Bitcoin was reaching its record values – “not operating in good faith” while promoting cryptocurrencies and initial coin offerings (ICOs). So the giant decided to ban them all.