Facebook, on Tuesday, announced its plans to introduce a digital wallet for Libra – a new global (crypto) currency powered by the blockchain technology. For which, it has created a new subsidiary, called Calibra, that aims to provide financial services to allow people to access and participate in the Libra network.
The digital wallet is expected to be available in Messenger, WhatsApp, and as a standalone app. And is expected to launch sometime in 2020.
What is Libra?
Libra is a new cryptocurrency that is built by Facebook and powered by its new blockchain technology. Facebook calls it, a ‘global currency and financial infrastructure’, which translates to a type of digital currency that can be used to buy things or send money to people around the globe with nearly zero fees. Users will be able to spend Libra using any third-party wallet apps or Facebook’s very own Calibra wallet that is built-into Messenger, WhatsApp, and its standalone app.
Facebook says that Libra is designed to be a stable digital cryptocurrency that will be backed by the Libra Reserve (a reserve of real assets). It is supported by a network of exchanges buying and selling Libra. That means anyone with Libra can be assured that they convert their digital currency into a local fiat currency based on the exchange rate. This is similar to how they would convert one fiat currency (like dollar, pound, rupee) to another.
The Libra currency is built on the ‘Libra Blockchain’, which is open-source to address a global audience. This is open to any consumer, developer, or business to use the Libra network and build products on top of it. It uses a new programming language, called ‘Move’, to implement custom transaction logic and smart contracts on the Libra Blockchain. Facebook says that the language is designed with safety and security into consideration, and takes insights from security incidents into consideration, to make it easier to write code without the risk of unintended bugs or security incidents.
Who owns Libra?
Unlike most other cryptocurrencies that are decentralized and not backed by any organization, the Libra currency will be governed by the Libra Association, which is an independent, not-for-profit membership organization, headquartered in Geneva, Switzerland. Even though Facebook is responsible for creating the Libra Association and the Libra Blockchain, it says that it will only maintain a leadership role through 2019. It will withdraw from the role, as soon as the currency launches in 2020, leaving the rest of the members of the association with equal votes in governance.
The current list of the ‘Founding Members’ of the organization, along with their respective industries, include:
- Payments: Mastercard, PayPal, PayU (Naspers’ fintech arm), Stripe, Visa
- Technology and marketplaces: Booking Holdings, eBay, Facebook/Calibra, Farfetch, Lyft, MercadoPago, Spotify AB, Uber Technologies, Inc.
- Telecommunications: Iliad, Vodafone Group
- Blockchain: Anchorage, Bison Trails, Coinbase, Inc., Xapo Holdings Limited
- Venture Capital: Andreessen Horowitz, Breakthrough Initiatives, Ribbit Capital, Thrive Capital, Union Square Ventures
- Nonprofit and multilateral organizations, and academic institutions: Creative Destruction Lab, Kiva, Mercy Corps, Women’s World Banking
Facebook says that it is expecting approximately 100 members of the Libra Association by the target launch in the first half of 2020.
How to use Libra?
As soon as Libra launches, users can own and spend it using a digital wallet, called Calibra, which will be built-in to Messenger, WhatsApp, and its own standalone app. Calibra is expected to launch in 2020.
Essentially, with Calibra, users will be able to send Libra to almost anyone with a smartphone at a fairly low cost, as quickly and easily as they would send a text message. Facebook says, with time, it will offer additional services to users or businesses like paying bills with the push of a button, buying a cup of coffee with the scan of a code, or riding local public transit without needing to carry cash or a metro pass.
Once Calibra is available, users will need a government-issued ID to sign up for an account. This will be used for identity verification to comply with laws and prevent fraud. Users, who do not have a Facebook account, can also use Calibra by simply signing up and verifying themselves using a government ID. After which, they will be able to use Calibra to send money to anyone, anywhere in the world, and also to pay for everyday transactions, like buying a coffee, buying groceries, or taking public transportation.
Additionally, users will also be able to convert their local currency into Libra to add money to their wallet and convert it back when they want to withdraw using Calibra. To make this process transparent, Calibra will show the current exchange rate for the user currency to make the transaction easy and smooth.
Is Calibra safe?
It has also said that at the time of launch, Calibra will have strong protections in place to keep the personal information and money of the users safe. For which, it will be using the same verification and anti-fraud processes that banks and credit cards use. This is in addition to automated systems, which will proactively monitor activity to detect and prevent fraudulent behavior. Apart from this, the company will offer dedicated live support to help users who lose their phone or forget their password. It will also offer a refund to the users whose account gets fraudulently accessed by someone, resulting in a loss of Libra.
Coming to privacy, Facebook says that it will take necessary measures to protect user privacy. But, it also adds that, apart from limited cases, Calibra will not share account information or financial data with Facebook or any third party without customer consent. That also means that the customer’s account information and financial data will not be used to improve ad targeting on Facebook or its products.