Facebook Inc plans to launch a cryptocurrency called Libra next year as part of its wider efforts to expand beyond social networking into e-commerce and global payments.
Facebook said it has linked with 28 partners to form Libra Association, a Geneva-based entity governing its new digital coin, which it will launch in the first half of 2020, marketing materials and interviews with executives show.
Facebook also created Calibra, a subsidiary which will offer digital wallets connected to messaging platforms Messenger and WhatsApp to save, send and spend Libras, which will be backed by government-backed assets.
The Menlo Park, California-based company has big aspirations for Libra, but consumer privacy concerns or regulatory barriers may present significant hurdles.
Facebook hopes it will not only power transactions between established consumers and businesses globally, but offer unbanked consumers access to financial services.
The name “Libra” was inspired by Roman weight measurements, the astrological sign for justice and the French word for freedom, said David Marcus, a former PayPal executive who heads the project for Facebook.
“Freedom, justice and money, which is exactly what we’re trying to do here,” Marcus added.
Facebook also appears to be betting it can squeeze revenue out of its messaging services through transactions and payments, something already happening on Chinese social apps like WeChat.
Facebook, whose shares gained 0.3%, faces a public backlash over a series of scandals, and its new venture may face opposition from privacy advocates, consumer groups, regulators and lawmakers across the world.
‘NEED TO REGULATE’
Some have called for Facebook to incur penalties, or be forcibly broken up, for mishandling user data, and not preventing Russian interference in the 2016 U.S. presidential election through a social media disinformation campaign.
“This instrument for transactions will allow Facebook to collect millions and millions of data, which strengthens my conviction that there is a need to regulate the digital giants,” said French Finance Minister Bruno Le Maire in an interview on Europe 1 radio.
Le Maire warned said he had asked the heads of the central banks of G7 countries to write a report on the issue by mid-July.
U.S. Senator Mark Warner, a Virginia Democrat who sits on the Senate Banking Committee, expressed concern that through Libra, Facebook was using its scale in social networking to achieve dominance in adjacent markets like mobile payments.
Facebook has engaged with regulators in the United States and abroad about the planned cryptocurrency, company executives said. They would not specify which regulators.
The company hopes it can bring global regulators to the table by publicizing Libra, said Kevin Weil, who runs product for the initiative.
“It gives us a basis to go and have productive conversations with regulators around the world,” he said. “We’re eager to do that.”
A U.S. regulatory source briefed on the matter said Facebook had been in communication with U.S. regulators but added it was still unclear how the currency would be structured and whether it would directly fall under any existing U.S. regulatory regimes.
The Swiss financial watchdog said it was in contact with the initiators of the Libra project but declined to comment on whether it was obtaining specific regulatory permission or status.
The Bank of England said its governor Mark Carney met Facebook CEO Mark Zuckerberg earlier this year, but declined to give details, while the Bank of International Settlements in Basel, an umbrella group for central banks, declined to comment.
Cryptocurrencies are largely unregulated and investors have lost hundreds of millions through hacks and steep price drops, while the market faces money-laundering and terrorist financing allegations.
Markus Ferber, a senior German lawmaker in the European parliament, said in a statement that Facebook’s new coin should put “regulators on high alert” and called on the European Commision to start work on regulatory framework for virtual currencies.