Some of the world’s biggest companies have come together to create their own cryptocurrency that they hope will rival the US dollar, a decade after the launch of bitcoin.
The Libra is backed by 28 companies including the likes of PayPal, Mastercard and Visa and will be launched by Facebook on WhatsApp, Messenger and other apps to allow people to spend and receive money through their phones.
“Technology has made almost everything more accessible, except money,” a video announcing the Libra cryptocurrency states. “1.7 billion are unbanked. That’s 31 per cent of the global population. For those who do have access transfers are slow. A typical cross-border payment takes three to five working days to complete [and] costs are high.”
It is claimed that Libra will be able to solve these issues of traditional currencies, while also overcoming the obstacles that have prevented bitcoin and other major cryptocurrencies from achieving mass adoption.
Facebook’s David Marcus, who spearheaded the development of Libra, said the mission of the new cryptocurrency is to create “a simple global currency and financial infrastructure that will empower billions of people”.
A recent report from London-based bitcoin exchange Luno suggests that a new global cryptocurrency could fill the gaps that both traditional currencies like the US dollar and cryptocurrencies like bitcoin fail to fill. The Future of Money survey found that developing markets would be quicker to adopt a currency like Libra than more developed countries.
“Our research shows that in these markets people are more financially savvy because they have to be, which means that they need and understand the benefits the new coins can offer,” said Marcus Swanepoel, Luno’s chief executive. “If a cryptocurrency can provide a secure and cheaper means of exchanging value, better than the existing system, it will be used.”
The new cryptocurrency had been widely rumoured since early 2018, when Facebook set up its own blockchain group to explore ways to utilise the technology.
With more than 2 billion users of Facebook-owned apps around the world, many have heralded Libra’s potential to become the world’s first mainstream cryptocurrency, however others have questioned the motives behind the initiative.
Unlike bitcoin, the value of Libra is tied to a collection of currencies in order to prevent price volatility – one of the main reasons people cite when explaining why bitcoin is unsuitable for use as a mainstream currency.
Despite several major retailers accepting bitcoin, the world’s first cryptocurrency has become more commonly used as a store of value or speculative investment.
Libra is not the first so-called stablecoin, with a Goldman Sachs-backed startup among several other cryptocurrency projects that have used this method to prevent huge price jumps. But it will be the biggest and most ambitious to date.
“Libra will be a very different beast to bitcoin as it is pegged to a basket of currencies, and as a result it will be a lot less volatile and will be viewed more as a currency as opposed to a store of value,” said Giles Hawkins, a partner at Ashfords Solicitors.
‘Invasive and dangerous’
The launch of Libra comes at a turbulent time for Facebook, following just over a year after the Cambridge Analytica scandal exposed the private information of tens of millions of its users. Since then, the tech giant has been plagued by a series of data breaches that has fundamentally undermined trust in Facebook and its accompanying apps.
Critics of the new cryptocurrency include Phil Chen, a blockchain expert who pioneered the world’s first cryptocurrency-enabled smartphone for HTC. Mr Chen claims Facebook’s involvement means Libra is “the antithesis of bitcoin” and another step towards total control of data and users.
“If you’re concerned with Facebook knowing too much or having too much access to your private data, well this global coin is the most invasive and dangerous form of surveillance they have designed thus far,” Mr Chen told The Independent.
“If this is launched and adopted worldwide, we’re bound to see Facebook in the top 10 biggest companies for the next 100 years that have complete ownership of the customer and their data, from their social graph to every transaction recorded through Facebook, WhatsApp and Instagram.”
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