Facebook takes aim at e-commerce with Libra cryptocurrency

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Facebook 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.

The Menlo Park, California-based company has 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.

Facebook is betting it can squeeze revenue out of its messaging services through transactions and payments, something already happening on Chinese social apps like WeChat.

“Combining transaction data from the Calibra app with the social data that Facebook and WhatsApp and Instagram has, that’s where the treasure trove is,” said Teunis Brosens, ING’s lead economist for digital finance and regulation in Amsterdam.
“And that’s where the questions emerge.”
However, consumer privacy concerns or regulatory barriers may present significant hurdles for Facebook, whose services already boast more than a billion users.

“Given its history of managing our data, it shouldn’t take much to convince people that Facebook managing our money is probably a terrible idea,” Neil Campling, Head of TMT Research at Mirabaud Securities in London said in a note.

Facebook hopes to not only power transactions between established consumers and businesses around the globe, but offer some consumers access to financial services for the first time.

The name “Libra” was inspired by Roman weight measurements, the astrological sign for justice and the French word for freedom, David Marcus, a former PayPal executive who heads the project for Facebook, said.

“Freedom, justice and money, which is exactly what we’re trying to do here,” Marcus added.

Facebook, whose shares gained around 2% in early trading, faces a public backlash over a series of scandals, and its new venture may face opposition from privacy advocates, consumer groups, regulators and lawmakers.