Facebook on Tuesday unveiled plans to launch a digital currency called Libra which will allow people to send money through apps like WhatsApp and Messenger as well as to make purchases using their smartphone whether or not they have access to a traditional bank account.
With the initiative, Facebook, which has over 2.3 billion monthly users – more than any other social network – hopes to bridge the gap for the estimated 1.7 billion adults who remain outside the global financial system.
"Libra holds the potential to provide billions of people around the world with access to a more inclusive, more open financial ecosystem," David Marcus, head of Calibra, a new Facebook subsidiary, said.
A Facebook source told Efe that the idea behind Libra was to make financial transactions easy for people wherever they lived in the world and whether or not they had access to a traditional bank account.
Libra, which Facebook and 27 other so-called founding member organizations want to launch next year, will function as a blockchain currency.
The cryptocurrency, which had been the subject of speculation for days before its official announcement, will not depend directly on Mark Zuckerberg's company, but will be managed by a consortium of firms grouped under the Libra Association based in Geneva (Switzerland).
The list of companies that have already backed the project includes, apart from Facebook, Visa, Mastercard, Vodafone, PayPal, eBay, Spotify, Uber, Lyft, Booking Holdings (which owns Booking.com, Priceline.com and Kayak.com) and Argentine e-commerce company Mercado Libre, among others.
"Sending money to your friend shouldn’t be harder than getting them an Uber ride home. We’re excited to work alongside the other Founding Members to help bring Libra to life," Peter Hazlehurst, head of payments at Uber, said.
Another Facebook source told Efe that for Libra to be successful, it could not be controlled by a single entity. They said Facebook would initially act as a project leader until the launch, when it will act as a partner with the same power as any other founding member.
The company hopes to secure the support of around 100 organizations across the world before the official launch in 2020.
"One challenge for Spotify and its users around the world has been the lack of easily accessible payment systems – especially for those in financially underserved markets," Alex Norström, chief premium business officer at Spotify, said.
"In joining the Libra Association, there is an opportunity to better reach Spotify’s total addressable market, eliminate friction, and enable payments in mass scale," he added.
Users will be able to manage the digital money using the app Calibra, which will act as a digital wallet and will be integrated into WhatsApp and Messenger – which are both owned by Facebook – as well as being offered as a stand-alone app available on IOS and Android systems.
Calibra will be managed by Californian company Menlo Park.
Given the company is still facing considerable scrutiny following a series of scandals linked to potential privacy breaches with its users, Facebook hammered home that Calibra would not share account information or financial data with Facebook or third parties without client consent.
That way, transactions carried out on the Calibra app will not influence Facebook ads, for example.
The social media platform said the only financial data it would share with third parties would be in order to comply with domestic laws, to protect against fraudulent and criminal activity and to process payments faster.
Unlike Bitcoin, currently the most widely used form of cryptocurrency, Libra will be underpinned by a reserve made up of bank deposits and sovereign debt to fix value and reduce volatility, Facebook said.
Libra's founders hope that a user who receives a payment through the app will be able to decide whether to keep their money in the digital wallet or withdraw it by converting it into their national currency based on the going rates.
The Libra Association said it would not manage the monetary policy of the currency but rather regulate it based on market demand. EFE-EPA