It is a hugely ambitious – some might say the megalomaniacal – project to create a new global currency. Facebook’s David Marcus tells me it is about giving billions of people more freedom with money and “righting the many wrongs of the present system”.
The message is this is not some little side project a small team at the Facebook’s Menlo Park headquarters will try out for a few months before moving on to something else – this is both the future of Facebook and the future of money, an initiative that has seen an alliance of big players in payments such as Paypal and Visa, Silicon Valley players such as Uber and Lyft and major venture capital firms, a kind of Avengers: Endgame of technology and finance superheroes come together to make the world a better place.
But there are still many questions about FaceCoin – or Libra as the company wants us to call it. The principal one I keep coming back to is – why? As in why do we need a new global currency and do we really want it from Facebook?
Who is it for?
The Libra mission statement makes great play of the 1.7 billion people who do not have a bank account and how expensive it is for them to transfer money to relatives. But there are already plenty of organisations addressing this issue, from Kenya’s Mpesa scheme to technology start-ups such as WorldRemit.
And this will apply not just to unbanked Facebook users in Kenya but to lucrative markets such as the United States and Britain, where national identity cards do not exist as a relatively easy way of verifying someone is who they say they are.If Libra does allow people to send money from their phones as simply as they send a text, that will prove very attractive. But doing this cheaply and in a secure fashion will be extremely challenging.
Is this really a global project?
Facebook, perhaps aware of the reputational issues it faces, appears very keen to stress Libra is a global coalition in which it is just one little player.
Sceptics recall Facebook launched its global internet access scheme, Internet.org, as a similar international coalition. Then it became the controversial Free Basics service, denounced in India as a vehicle solely Since then, the other coalition partners seem to have melted away.
How does Facebook make money from it?
There will be what Facebook describes as a “negligible” fee for every transaction, mainly, it says, to stop the network being spammed by millions of back and forth payments in a denial-of-service attack.
Through its Calibra subsidiary, the social giant may eventually seek to offer users additional financial services. But the real prize is simply making people spend longer on Facebook or WhatsApp so that they can be served more adverts.
What do the partners get out of it?
It is being reported that partners such as Paypal, Mastercard and Visa are paying $10m (£8m) each for the privilege of operating a node in the Libra network. It seems bizarre they would want to support an organization whose whole pitch is it can do a better job than them.
But, then again, they will have access to the data flowing across the network, albeit in pseudonymous form, and that should give them valuable insights into what is being spent and where.
Why is it a cryptocurrency and why does it need the blockchain?
Facebook insists that Face coin – sorry, Libra – will have all the benefits of Bitcoin without the downside. It will be “global and instantaneous” as the original cryptocurrency but also secure and stable. And because it does not rely on mining, it will not have a major environmental impact.
But Bitcoin skeptic David Gerard says it is not clear why Libra is being implemented as a cryptocurrency – or needs a blockchain, an immutable distributed ledger visible to anyone.
“The usual reason for saying ‘blockchain’ is to lend magical marketing dust to unmagical ideas,” he says.
“But Libra is intended to be a service people use – so it’ll stand or fall on being useful and convenient, not whether it has a buzzword.”
We pride ourselves on delivering innovative, digital experiences that make an impact.
Yes. We believe that creating memorable experiences are the best way to connect with your consumers.