The social network’s new cryptocurrency could fuel its e-commerce ambitions.
With Libra, Facebook is stepping into the cryptocurrency business.
Facebook changed the way we communicate. Currently the social media giant desires to change how its 2.38 billion users think about using a cryptocurrency to make everyday purchases.
The social network and its partners on Tuesday disclosed a digital coin called Libra, confirming details of a project that had been leaking out in dribs and drabs for months. Libra, which will be managed by a governing body and be backed by stable financial assets, is anticipated to debut in the first half of 2020.
Over the years, the world’s largest social network has allowed users to send money, purchase merchandise from retailers and sell their own used clothing and piece of furniture on its platform. With Libra, Facebook is encouraging all of those activities and more.
Lisa Ellis, an analyst at MoffettNathanson research, says Libra has the potential to be “highly” successful. “Payments are foundational to doing commerce,” she said, “and this would be a big step toward enabling that.”
Facebook’s cryptocurrency ambitions are the latest example of the social network’s efforts to cement itself in the daily lives of its users. If Facebook and its partners can persuade people to use Libra, the social network could attract new users, keep them online longer and generate more revenue outside of advertising, which made up 99 of its $15 billion in sales in the first three months of 2019.
The move also comes as Facebook doubles down on its private spaces. The corporate plans to make it possible for users to send messages without switching between Messenger, WhatsApp and Instagram. Calibra, the digital wallet Facebook created to store Libra, will be built into Messenger and WhatsApp, however not Instagram at first.
Still, Facebook must overcome its image issues amid a series of privacy scandals. The social network has alarmed lawmakers with the amount of personal information it gleans from users for ad targeting. Facebook says it’ll keep Calibra information separate from social data.
How quickly Facebook can rope in Libra users is an open question. Using existing cryptocurrencies to pay for everyday purchases is far from common, despite efforts to make those transactions mainstream. Many cryptocurrencies, most notably bitcoin, swing wildly in value and exist in a confusing regulatory atmosphere. They’ve been used for speculating or in criminal activities.
Facebook and its partners, which formed a nonprofit called the Libra Association, say they’re working to address these issues. Libra will be backed by a reserve of assets consisting of “bank deposits and government securities in currencies from stable and reputable central banks.” that suggests major international currencies, like the dollar and the euro, which don’t fluctuate violently day to day.
The Libra Association is additionally working with regulators around the world to make sure the cryptocurrency conforms to anti-money laundering rules. Getting all those ducks in a row will take time.
Facebook isn’t the first tech company to jump on the cryptocurrency bandwagon. Line, a Japanese messaging app, launched a digital token called Link last year. Chinese messaging app WeChat lets users link credit cards to make payments and money transfers, however banned cryptocurrency transactions.