Facebook enters cryptocurrency arena
Sending money will be as easy as sending a photo over Messenger or WhatsApp, the social media giant says
Social media giant Facebook has announced its foray into the fintech and cryptocurrency market with plans for a blockchain-based digital wallet called Calibra.
Calibra’s vice-president of product, Kevin Weil, told Business Day on Tuesday that the Facebook subsidiary’s first product will be the digital wallet for Libra, a new global currency powered by blockchain technology.
The wallet will be available via Facebook Messenger, WhatsApp and as a standalone app, and is expected to be launched in 2020. Using these platforms, users will be able to transact and send money via the Libra blockchain.
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“It will be like sending a photo on WhatsApp,” Weil said.
Blockchain is a type of distributed ledger technology used to maintain a permanent and tamper-proof record of transactional data. It functions as a decentralised database that is managed by a peer-to-peer network of computers.
“Anybody can build a digital wallet” for the Libra digital currency, Weil said.
Just as Google Chrome, Firefox and Apple’s Safari allow for access to the same internet, Weil said Libra will offer ‘interoperability’ where anyone using Libra can create products, services and transaction platforms, as Facebook is doing with Calibra.
Existing blockchain systems have yet to reach mainstream adoption, said David Marcus, head of Calibra.
“Mass-market usage of existing blockchains and cryptocurrencies has been hindered by their volatility and lack of scalability,” Libra said.
Libra is hoping to tackle this issue by getting buy-in from the likes of Mastercard, Visa, PayPal, Naspers’ fintech business PayU, and Vodacom’s parent company, Vodafone.
This group is called the Libra Association, and was formed to govern, manage and develop the new ecosystem.
Libra Association’s head of policy and communications, Dante Disparte, said the group will be responsible for facilitating the development of the Libra blockchain "and managing the Libra Reserve" — a reserve of real assets intended to provide low volatility, wide global acceptance, and fungibility to back the Libra currency.
With 28 members at present, the Libra Association aims to have 100 members when Libra is launched in 2020, Disparte said.
PayU CEO Laurent Le Moal said: “The vision of the Libra Association aligns perfectly with PayU’s vision of creating a world without financial borders, where everyone can prosper."
"We believe that blockchain technology has the potential to reshape the way businesses and consumers transact across nearly every industry and that with its focus on growth markets, the Libra Association will help deliver this change for good.”
With a user base reaching 2.7-billion people, Facebook sees an opportunity to scale a new global currency to rival and work alongside the major currencies of the world.
This comes amid heightened scrutiny over the social media giant, largely relating to privacy concerns.
Weil said security was a priority for the Calibra platform. He said Facebook would separate user data for social media and financial services, employing the same antifraud and verification processes used by banks.
Disparte said Calibra and Facebook were separate from the Libra Association. Facebook will function like any other member of the association and not have greater powers or decision-making authority over Libra.
Libra is trying to increase financial inclusion globally, lower the costs associated with financial services, and reduce the time it takes to transact or send funds across borders, Disparte said.
According to the World Bank, 1.7-billion adults globally remain outside of the financial system with no access to traditional banking, even though 1-billion of them have a cellphone, said Marcus.
No firm date has been given as yet for the launch of Libra in 2020.
Marius Reitz, GM for Africa at Naspers-backed cryptocurrency exchange Luno, said that with some of the world’s largest technology giants launching their own cryptocurrencies, "we believe developing markets will be the lead adopters".
"Our research shows that in these markets, people are more financially savvy because they have to be, which means that they need and understand the benefits the new coins can offer," Reitz said in a statement.
When asked if a single global currency would make the current financial system better or worse, almost three times as many survey respondents from SA and Nigeria said it would make it better, compared to the UK, Luno said of a recent study.