For the first time, Facebook spoke of its cryptocurrency and confirmed that it will be called Libra. This digital currency will be tied to the dollar, which will avoid its volatility. In addition, the company introduced the Blockchain system with which transactions can be made.
Sending money, as easy as sending a text message
Facebook said in its statement that sending money will be as easy as sending a text message. In fact, the company clarifies that the main idea is to facilitate transactions between individuals. Emphasizes that financial services do not reach everywhere, especially in third world countries and the company expects this app to be one of the solutions.
The portal The Verge highlights that in fact Facebook would be betting on becoming the most important cryptocurrency and it is believed that little by little it will incorporate other financial services such as loans and credits. This currency is designed to save, send or spend money with the same simplicity that characterizes this social network.
For now, focusing on facilitating transactions, ‘Libra’ already has more than 27 allied companies. Among them Mercado Pago, PayU, both members of Colombia Fintech.
PayU and the association with Libra
For PayU the Association with Libra has a particular focus on high growth markets, which “is perfectly aligned with its vision” of creating a world without financial borders where everyone can prosper. “It is part of our strategy to be close to disruptive technologies, accepting this invitation and forming part of the association, we believe that we are playing alongside the best and in an example of how blockchain technology can positively change an entire industry”, he clarified. Andrés Fuentes, country manager of PayU Colombia.
For its part, Mercado Pago emphasizes that access to digital financial services has a great impact on people’s lives, since it adds USD 3.7 trillion to economic development; creates 95 million new jobs; and increases the income of individuals by around 20%. And it is estimated that it can reduce extreme poverty by 22%. Therefore, he clarifies that his participation is aimed at continuing to take advantage of the power of technology and thus help to democratize finance in Latin America.
A positive bet
Libra, being a currency tied to the US dollar, would not work like the Bitcoin that can be mined and generate more money. For its part, it will have the security and anti-fraud standards used by banking entities. “We have tools in case your account is stolen or a victim of fraud. If you lose money because of them, we will return it to you”, the company says in its statement.
For Erick Rincón, president of Colombia Fintech, the bet is positive since “cryptoactives are beginning to be seen as an alternative for the development of electronic commerce and a public blockchain”.
Facebook argues that Libra collects learning from the best open Blockchain such as Bitcoin and Ethereum, and its design is better compared to these with respect to the possibility of processing millions of transactions (scalability) and better energy consumption. However, when reviewing the information, there are doubts regarding its governance, which is given by a single foundation. Additionally, whoever wants to participate by validating transactions in the network must be authorized and pay US $ 10 million (which makes it a private Blockchain), although in the future they want anyone to be able to validate transactions without needing authorization or to identify themselves (Public Blockchain as Bitcoin).
The company based in Menlo Park, California, has big plans for Libra, but concerns about consumer privacy or regulatory barriers can pose significant obstacles. Libra partners expect to have 100 members to launch the cryptocurrency during the first half of 2020. Each member obtains the right to vote on substantial decisions related to the Libra network.
Facebook does not plan to maintain a leadership role after 2019
The Libra Association plans to obtain financing through a private placement in the coming months, according to a statement from the association. The name “Libra” is inspired by Roman weight measurements, the astrological sign of justice and the French word for freedom, said David Marcus, a former PayPal director in charge of the Facebook project.
In conclusion, the presentation of Libra represents the entry of an important player to the financial sector, Fintech, Blockchain and Cripto on a global scale. The implications for users and competitors will be seen on the road, but for the user it will always be positive to have options. Facebook and the Libra partners will still have many challenges to overcome, questions to clarify and confidence to generate for its launch in 2020.
Also published on Medium.