After months of keeping the project under wraps, Facebook finally wore its cryptocurrency plans on its sleeves.
First to be unveiled was Libra.
Libra, in essence, is a stablecoin. It is not designed to be a stand-alone cryptocurrency like Bitcoin or Ethereum. Instead, it will be backed by fiat reserves mostly generated from a pool of investments made by companies that bought into the project.
Projected to be publicly available in the first half of 2020, Libra will exclusively run on a dedicated blockchain network, Libra Foundation.
Targetting the unbanked sector
In a recent study commissioned by the World Bank, around 1.7 billion adults remain unbanked. This means there is a significant number of people across the globe who go about without an account at a financial institution or through a mobile money provider.
Facebook understands the implications of these findings and seeks to bridge the gap. In fact, the project’s White Paper mentions this specific statistic, saying that hard-earned income is “eroded by fees and wire costs to overdraft and ATM charges.”
In its desire to make financial services more accessible particularly to the unbanked sector, Facebook unveiled Calibra, a Libra-based digital wallet. It is designed to be compatible with Messenger and WhatsApp, making it a viable alternative in making fast and affordable payments to and from any point in the world as well as monetary storage.
Not too fast
Facebook’s unveiling came with a major hiccup, however.
Just hours after going public with Libra and Calibra, US Democratic Representative Maxine Waters, chair of the House Financial Services Committee, requested that Facebook pause all efforts where their digital currency was concerned.
“Given the company’s troubled past, I am requesting that Facebook agree to a moratorium on any movement forward on developing a cryptocurrency until Congress and regulators have the opportunity to examine these issues and take action, ” Waters said in a statement.
She is not alone in expressing apprehension towards the social media giant’s imminent crypto leap. US Republican Representative Josh Hawley seconded Waters’ unease, even alluding to Facebook’s seeming monopoly expansion.
“We need to see exactly what their specific proposals are, but I’m very concerned about Facebook’s behavior on a range of fronts. I’m concerned about their size, I’m concerned about their anti-competitive conduct, I’m concerned about their rampant violations of privacy,” Hawley said in an interview with Yahoo Finance.
Negative reactions came from other parts of the world as well.
A Bloomberg report details France’s finance minister Bruno Le Maire stern warning against Libra becoming a “sovereign currency” and a parliament member of Germany’s fear that Facebook will ultimately become a “shadow bank.” Even the Bank of England joined in the unfriendly chorus saying they would “approach Libra with an open mind, not an open door.”
In light of all the immediate backlash, Facebook is determined to calm the waters in order to proceed with its 2020 launching.
In a statement released on Tuesday, the Libra Association assured the public that it will “continue engaging with regulators, policymakers, and experts to solicit feedback and ensure that this global financial infrastructure is governed in a way that is reflective of the people it serves.”
But the path forward seems to be marred by several opposing forces at home and overseas.
“We cannot allow Facebook to run a risky new cryptocurrency out of a Swiss bank account without oversight, ” US Rep. Waters said.
Facebook has yet to answer US lawmakers’ questions regarding its cryptocurrency.