After much speculation, Facebook has officially revealed it will venture into the crypto and blockchain world, launching a cryptocurrency called Libra next year.
The social media giant will launch Libra through a new subsidiary, called Calibra, which will also supply the digital wallet for the new currency.
According to a Facebook statement, the wallet will be available in Messenger, WhatsApp and as a standalone app — and is expected to launch in 2020.
“For many people around the world, even basic financial services are still out of reach: almost half of the adults in the world don’t have an active bank account and those numbers are worse in developing countries and even worse for women,” Facebook said.
“The cost of that exclusion is high — approximately 70 per cent of small businesses in developing countries lack access to credit and $25 billion is lost by migrants every year through remittance fees.
“This is the challenge we’re hoping to address with Calibra, a new digital wallet that you’ll be able to use to save, send and spend Libra.
“From the beginning, Calibra will let you send Libra to almost anyone with a smartphone, as easily and instantly as you might send a text message and at low to no cost. And, in time, we hope to offer additional services for people and businesses, like paying bills with the push of a button, buying a cup of coffee with the scan of a code or riding your local public transit without needing to carry cash or a metro pass,” Facebook said.
Already, the move has met with criticism from some industry commentators.
ForgeRock senior manager, solution architecture at digital identity management provider, Adam Biviano, said Facebook’s digital currency will challenge the banks.
“There is no doubt that we’re in the midst of dramatic changes to the banking industry, and while I don't have a crystal ball to predict whether Libra itself will take the world by storm, I can draw upon the observations of how other industries have been impacted as technology has swept through.
“One common denominator applies - if incumbent players, no matter how big and dominating, aren't ready and willing to adapt, they will be left by the wayside.
"In financial services, the move to API driven services like open banking is a golden opportunity to stay ahead of the wave and for banks to re-architect their business for agility. A key aspect to this is developing trust and the ability to take their customers with them on this journey which requires robust mechanisms to manage the underlying identities, relationships between them and allow secure frictionless ways to transact business."
Meanwhile, ICT analyst Paul Budde, said the move is “interesting.” There is concern that Facebook could use its social media clout to try and dominate mobile payments.
“You indeed need a larger 'force' to get some serious momentum behind this technology and Facebook could be such a force.
“I’m just concerned about the unregulated power of Facebook. They could indeed be a very disrupted force to the banking industry.”
Late last year, Budde had predicted that Facebook would fail when and if its long-awaited cryptocurrency venture got off the ground.
“The question for Facebook will be if they can make changes to their complex system of algorithms that would make it possible to stop fake news, lies and a range of what can only be called criminal behaviours.
“Not only is this almost technically impossible (unscrambling the egg) but such changes could limit their lucrative advertising business; and this fear is reflected in the falling share price.”
Meantime, US lawmakers are calling for Facebook to put the brakes on its cryptocurrency project.
House Financial Services Committee chair, Maxime Waters, said Facebook should stop the project until Congress and regulators can review the issue.
"Facebook has data on billions of people and has repeatedly shown a disregard for the protection and careful use of this data," she said in a statement. "With the announcement that it plans to create a cryptocurrency, Facebook is continuing its unchecked expansion and extending its reach into the lives of its users."
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