Back in May 2018, Facebook mysteriously announced they were setting up a team to work on Blockchain.   Blockchain is the theory behind the digital currency of BitCoin – an online form of money.  David Marcus who was then the vice president of messaging products became the head of this new group.   He was previously the lead on the Facebook Messenger product, a key feature of the Facebook platform.   So this new product was seen to be as important as Messenger.

Fast forward to 2019 and it becomes clear what Facebook’s plans were back then.   They intended to spearhead the development of a totally new digital currency, called Libra.

Facebook recently announced that they were to be part of a consortium of credit card companies, venture capitalists and tech companies who were backing this new technology.  Companies such as Visa, Mastercard and Uber announced their intent to support this new platform.

So, what is Libra?   Well, think of it as a new currency, like the dollar.   You want to pay someone now – you send them dollars.   In the future, Facebook wants you to be sending payment in the form of Libra.

Initially, Facebook wants to target Libra at developing countries – ones where access to a bank is difficult.  They want to make it easier for individuals in these countries to transfer payments to friends, family and other businesses.   Though the end goal is to have an international currency where you can send payments regardless of the country/location you’re in.

Although Facebook is developing the technology behind Libra, they intend to hand it over to a non-profit organization called the “Libra Association”.

This association will comprise the following companies; Women’s World Banking, Kiva, Booking Holdings, Andreesen Horowitz, Farfetch, Iliad, Mastercard, Uber, PayU, Mercado, Coinbase, PayPal, Creative Destruction, BisonTrails, Calibra (Facebook), Xapo, Anchorage, Spotify, Ebay, Breakthrough Initiatives, Stripe. Lyft, Visa, Thrive Capital, Ribbit Capital, Union Square Ventures, Vodafone and Mercy Corps.

Each of these companies had a “buy-in” of $10 million to be part of the association.   This $10 million fee goes towards what is called the Libra Reserve, essentially equity backing each unit of Libra currency.   This is different to BitCoin which is has no equity to back it – instead it relies on the shortage of BitCoins to inflate the price.

Facebook has formed its own subsidiary called “Calibra” to become a member of the association.   In a Facebook post to the Libra Association site, they stated,  “We will also 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,” and “We believe this will be a significant undertaking — and responsibility — and we will continue to work openly and collaboratively as we move toward our goal of launching this new ecosystem in the first half of 2020.”

The move hasn’t been missed by international oversight though.   The US senate are due to hold a hearing next month over Libra.   Senator Sherrod Brown said “Facebook is already too big and too powerful, and it has used that power to exploit users’ data without protecting their privacy.   We cannot allow Facebook to run a risky new cryptocurrency out of a Swiss bank account without oversight. I’m calling on our financial watchdogs to scrutinize this closely to ensure users are protected.”

Likewise, Europe is sceptical over the future of Libra and is calling for the G7 to report on Facebook’s proposal next month.

It’ll be interesting to see what becomes of Libra.   It has a lot of serious backing behind it, but also a lot of scepticism and fear from international regulators.    Watch this space!