Facebook plans currency for its users
Facebook already rules daily communication for more than 2 billion people around the world. Now it wants its own currency, too.
The social network unveiled an ambitious plan Tuesday to create a new digital currency similar to Bitcoin for global use, one that could drive more ecommerce on its services and boost ads on its platforms.
But the effort, which Facebook is launching with partners including PayPal, Uber, Spotify, Visa and Mastercard, could also complicate matters for the beleaguered social network. Facebook is currently under federal investigation over its privacy practices, and along with other technology giants also faces a new antitrust probe in Congress .
Creating its own globespanning currency — one that could conceivably threaten banks, national currencies and the privacy of users — isn’t likely to dampen regulators’ interest in Facebook.
“It’s a bold and strategic move that has clear risks as well as opportunities tied to it,” said Wedbush Securities analyst Dan Ives. “This could raise further yellow flags as more regulators focus on Facebook.”
David Marcus, the head of Facebook’s cryptocurrency operation, said in a tweet Tuesday that Facebook is creating a separate subsidiary, Calibra, to handle the new currency. He said feedback from customers has been “loud and clear” about keeping social media and financial data separate.
“We understand we will have to earn your trust,” he wrote.
The digital currency, called Libra, is scheduled to launch in the next six to 12 months. Facebook is taking the lead on building Libra and its underlying technology; its more than two dozen partners will help fund, build and govern the system. Facebook hopes to raise as much as $1 billion from existing and future partners to support the effort.
Company officials emphasized that Libra is a way of sending money across borders without incurring significant fees, such as those charged by Western Union and other international money-transfer services. Fees typically start at a few dollars but can be much higher when paying with a credit card. Shares in Western Union fell 2 percent in morning trading.
Libra could also open up online commerce to huge numbers of people around the world who currently don’t have bank accounts or credit cards.
“If you fast forward a number of years, consumers all over the world will have the ability to access the world economy,” Marcus said in an interview with The Associated Press.
Facebook also could use its own currency to drive more people to make purchases from ads on its social media sites, said Gartner analyst Avivah Litan, who based her comments on press reports about Libra that preceded Facebook’s formal announcement. “This is about fostering more sales within an ad to get more business from advertisers to make ads more interesting on Facebook,” she said.
Backing by familiar corporations might also make Libra the first Bitcoin-like currency with mass appeal. Such “cryptocurrencies” have generally failed to catch on despite a devout following among curious investors and innovators.