In what has been the world’s worst kept secret, Facebook has finally announced its new global digital currency called ‘Libra’. This new currency is backed by the likes of Uber, VISA and Spotify, and will allow users to make payments via Facebook’s apps, as well as on the messaging service – WhatsApp.
From early 2020, users will be able to purchase Libra directly from Facebook’s platform and store it in a digital wallet called Calibra. They will then be able to send the currency to other users through instant messaging services such as Messenger and WhatsApp. Users will also be able to pay bills, purchase everyday goods and use it to ride local transport.
Facebook has said that transactions would be at low to no cost, although it is expected to take a small commission on payments made through its platforms.
Where can I spend it?
Facebook has emphasized that Libra will be managed independently by a group of companies and charities – of which Facebook is just one – called the Libra Association. This is so Facebook can offset security and privacy concerns and ensure the currency is given every chance to succeed.
All members are likely to accept Libra, helping to drive adoption and take the currency mainstream. These companies include:
- Payments firms such as Mastercard and PayPal
- Digital businesses including eBay, Spotify and Uber
- Telecoms firms such as Vodafone
- Charities such as Women’s World Banking.
Facebook has also said it expects Libra would be bought and sold on currency markets in the future.
Why has Facebook created this?
Facebook has said that Libra has been created to tackle global financial inclusion issues, citing that approximately 1.7 billion adults worldwide do not have a bank account.
It said the issue of being “unbanked” disproportionately affected people in developing countries, and in particular women. The idea, therefore, is that Libra will unlock access to financial services for these people.
However, while the currency has the green light to launch in the US, it is unclear what will happen in places such as India, which has recently clamped down on digital currencies.
In fact, early reports suggest that only 12 markets will be ready to adopt Libra by the time it has launched.
There’s no doubt that Libra will change how we interact with financial organizations and will force banks to re-evaluate their services. But only time will tell if it will be successful or whether it would become just another technology that does not quite hit the mark.
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