The story so far: On June 18, Facebook announced that it is going to launch a global digital currency by the first half of 2020. The currency has been named Libra. It will be run by the Libra Association, a Geneva-based entity that has 28 founding partners, including Facebook, Mastercard, Visa, Uber and the Vodafone group. Almost immediately, concerns were raised by some lawmakers, commentators and even the co-founder of Facebook, Chris Hughes, who is now one of the foremost critics of the social media network he helped create.
Why does the world need Libra?
A white paper released by the Libra Association says its mission “is to enable a simple global currency and financial infrastructure that empowers billions of people”. The point it makes is this: in a world with cheap data and smartphones, about 1.7 billion adults are still outside the organised financial system in the world. This, despite a billion of them having mobile phones and nearly half a billion having Internet access.
The reasons for this are high fees, lack of access, and absence of documentation. Libra is being pitched as a solution to this. The promise is of financial inclusion on a global scale.
It is apparently being built on the block chain technology. How similar is it to Bitcoin?
It is true that Bitcoin and Libra are both based on block chain technology, which refers to a form of distributed ledger — not centralised — of transactions. These are created by complicated math functions that make them almost incorruptible. But beyond this, there is very little in common between Bitcoin and Libra.
Why is Libra being opposed?
The concerns include privacy, money laundering and terrorism finance.Moreover, it is said that Facebook could become a “shadow bank” and that regulators should be on high alert.
Facebook’s co-founder Hughes, terming the digital currency “frightening”, has said it is a shift of power from central banks towards multinational corporations.