This week, Facebook revealed their plan to create Calibra, an alternative financial services system that will rely on Libra, its own cryptocurrency powered by blockchain technology. Facebook is planning to launch Calibra’s first product by the first half of 2020 – a digital wallet app that will also be built into WhatsApp and Messenger, allowing users to buy things and send money.
But how will this work? In a nutshell, people will be able to cash in local currency at local exchange points, get Libra, spend it like its normal money (but without high transaction fees or their identity), and then cash out whenever they want.
To protect users’ privacy, Calibra will handle all crypto dealings and store payments data. As a result, users’ data from Libra payments will never mix with their Facebook data and will not be used for ad targeting.
According to Facebook, Libra is meant to address the challenges of global financial services and promote financial inclusion. For example, today about 1.7 billion adults remain without access to a bank account and $50 billion are lost annually due to exploitative remittance service charges. With Libra, people will be able to send and receive money at low to no cost, small businesses will be able to accept digital payments without credit card fees, and overall financial services will be more accessible.
However, despite these potential benefits, Facebook’s venture into the financial services industry has raised some concerns. People are questioning Facebook’s motives as well as the usefulness, stability and transparency of cryptocurrencies. Furthermore, given Facebook’s troubled history with privacy breaches, its commitment to protecting user-data and privacy is under scrutiny.
Why it’s hot:
This is the first time a “mainstream” company attempts to get involved in the world of cryptocurrencies and, if all goes to plan, this new digital currency could fundamentally change global financial systems forever.