The world's most dominant social networking company, Facebook, has announced that come 2020, it will be unveiling its own cryptocurrency known as Libra. As the official blog explains, the new digital currency will be made available through a digital wallet called Calibra that will be available in Facebook Messenger, WhatsApp, and as a standalone app. Jameson Lopp, CTO of Bitcoin security company Casa, has analyzed the whitepaper and suggests Libra may be facing some long-term challenges.
Indeed, Le Maire's concerns could be justified according to a report by BeinCrypto.com that suggested Libra could be disrupted by as little as one-third of its network's producers. Ultimately, the company aims for its digital currency to replace regular money for a wide variety of use cases.
Early developers believed the world needed an alternative to traditional currencies, which are controlled by governments and central banks. It can be used to buy nearly anything and can support an entire range of financial products from banking to loans and credit. While Facebook has created the cryptocurrency, it has put it in the hands of a non-profit organization that includes Mastercard, Visa, eBay, PayPal, Stripe, Uber, Lyft, and a bunch of other service providers and venture capital companies. Libra is backed by governmental currencies like the U.S. Dollar and the Euro, so it should suffer from the wild value fluctuations that Bitcoin has experienced.
"This instrument for transactions will allow Facebook to collect millions and millions of data, which strengthens my conviction that there is a need to regulate the digital giants", he said in an interview on Europe 1 radio.
For the digital currency to operate on a global scale, Libra is relying on a platform of blockchain technology that uses about 100 trusted computer "nodes" to validate and register transactions.
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Europe will be sympathetic to that argument since it fears Iran going rogue and wants to keep the deal intact to discourage that.
Indeed, Tuesday's announcement provoked a stern reaction from French Finance Minister Bruno Le Maire, whose government has also initiated a new tax on digital giants like Facebook that has angered the United States.
Additionally, Calibra will make sure it doesn't share users' information with other apps without his or her knowledge, which becomes a must after all the data breaches Facebook has been a part of.
Kerner wrote in a recent blog post that cryptocurrencies are essentially loyalty points and that a broad use of such digital money could be "a revolutionary tool" to expand the use of these kinds of digital "tokens".
Facebook hopes to not only power transactions between established consumers and businesses around the globe, but offer some consumers access to financial services for the first time.
In addition to competition and privacy concerns, regulators will also be concerned about Facebook's wish to enable its cryptociurrency to be converted into other currencies, raising the prospect of increased money laundering. "We can not allow Facebook to run a risky new cryptocurrency out of a Swiss bank account without oversight", said Senator Sherrod Brown, the top Democrat on the Senate Banking Committee, in a statement. "That's why I think the Facebook coin could be a watershed moment in crypto".
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