Facebook creating its own digital currency
SAN FRANCISCO — 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 a plan Tuesday to create a new digital currency similar to Bitcoin for global use, one that could drive more e-commerce 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 complithreaten cate matters for the beleaguered social network. Facebook is 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 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 media and separate.
“We understand we will have to earn your trust,” he wrote.
The digital currency, called Libra, is scheduled to launch in six to 12 months. keeping social financial data
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 said Libra is a way of sending money across borders without incurring significant fees, such as those charged by Western Union and other 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% 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.
Facebook also could use its own currency to drive more people to make purchases from ads on its 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.
Libra will be different, Facebook says, in part because its value will be pegged to a basket of established currencies, such as the U.S. dollar, the euro, the yen and others. Each purchase of Libra will be backed by a reserve fund of equal value held in realworld currencies to stabilize Libra’s value.