By John McDonald
Facebook has a problem. Actually, Facebook has several problems, only one of which is the extremely high-profile issue of privacy. Interestingly, the social media platform’s new cryptocurrency, Libra, takes inspiration from China’s largest social network and ubiquitous payment app, WeChat, for the answer to the company’s ongoing issues.
Libra, which Facebook officially announced and confirmed mid-June, will launch in 2020 and be available in a cryptocurrency wallet that may be accessed via Facebook Messenger, WhatsApp, and as a standalone app.
Not surprisingly, Facebook is positioning the launch of Libra and its digital wallet, Calibra, as a philanthropic solution to an international problem. “If you have an internet connection today, you can access all kinds of useful services for little to no cost…but when it comes to saving, sending, and spending money, it’s not that simple,” the company opined on its blog.
“For many people around the world, even basic financial services are still out of reach,” the post went on, positing that this lack is stifling small business and enterprise in developing countries and costing migrants about $25 billion in remittance fees annually.
Facebook says Libra will be governed by an independent foundation, the Libra Association, that will consist of Facebook representatives, financial institutions, nonprofits, merchants, venture capitalists, and companies involved in running the “nodes” associated with the Libra blockchain.
The blockchain will verify transactions and create a shared ledger for the currency. Reportedly, early partners in this process will be Mastercard, Paypal, Uber, and Booking.com, all of which may pay as much as $10 million for this role in the new currency.
While starting a cryptocurrency is attractive for a number of reasons, Facebook has particular cause to hope Libra is successful. Not only would the company benefit from a slice of the multi-billion-dollar remittance market via offering cross-border payments, but people who use the system as an integral part of their life or business will have a much harder time “quitting Facebook,” an ongoing problem for the platform.
“It’s pretty easy to quit Facebook, the app where you fight with your childhood neighbor about politics. It’s much more difficult to quit Facebook, the app you use to pay your rent,” wrote Intelligencer and New York Magazine columnist Max Reed.
Reed suggests that Libra is, at heart, a long-term play to take over the international currency platform. “Its long-term competition isn’t PayPal or Visa or even WeChat, but the renminbi, the euro, the yen, and the dollar,” Reed wrote. If, over time, Facebook succeeds in this, then its growth problems could be over.
Furthermore, if the company can convince customers it is trustworthy enough to run a cryptocurrency despite its massive privacy issues in the past few years, it could ultimately resolve its issues – both perceived and otherwise – with regulators and consumers.
Reed noted his analysis of the fallout of such a successful move for Libra is “wildly dystopian,” but warned readers anyway: “If you think Facebook is powerful now, just wait until it is, essentially, the global federal reserve, overseeing a global currency over which it has not just monetary control, but a visible, minable record of every transaction made.”