What is Libra? What you need to know about the Facebook-backed currency
Facebook wants to get involved in payments; Libra is a new cryptocurrency that will reportedly roll out this year - although as you'll hear it's had numerous issues with partners dropping out including PayPal, Visa and MasterCard as well as regulatory challenges.
But Libra isn't designed as a replacement for current currency - instead, it's designed to bring digital payments to those who don't have them currently and create a way of doing cheaper transactions across borders.
What is Libra?
Libra is a not-for-profit foundation (called the Libra Association and based in Switzerland) with a simple rationale of providing a global currency. It says that "moving money around the world should be as easy and cheap as sending a text message".
You'll be able to pay people easily via a standalone app or via WhatsApp or Messenger.
It'll be designed to be scalable, secure and fast and was originally said to be with us this year. We do know that it's currently undergoing testing.
However, Facebook chief Mark Zuckerberg admitted that regulatory concerns may push this date back. The key problem is that financial regulations are different in different territories.
Consequently, Libra's head of policy Dante Disparte was quoted in January 2020 at the Global Blockchain Business Council in Davos that the association would "rather go slow and get it right than assign a deadline to launch that keeps us from solving the problem of payments for those who need this solution most."
Coincidentally, the name Libra comes from the Roman measurement of weight - its why we measure pounds of weight in lbs. It will be backed by several existing currencies including US Dollars, the UK Pound and the Euro.
Libra says there are 1.7 billion people – 31 percent of the global adult population – who do not have access to an account at a bank, including a staggering 14 million people in the US.
There may also be new ways for web services like Uber or Spotify to pick up new users through partnerships with other founding members or from people who don't have traditional bank accounts.
There will still be some fees, but the organisation is talking about making money transfers much more accessible including sending money across borders "for a low fee". Local regulations will also have to be obeyed where Libra operates - it's not clear where the currency will launch initially.
What's the latest with Facebook's Libra partners?
Libra is losing partners fast. Vodafone is the latest to pull out, saying it will instead continue with its M-Pesa project.
The original list of partners included Visa, Mastercard, PayPal, eBay, Stripe, Lyft, Uber, Vodafone and Spotify. In October, Visa, MasterCard, Stripe, eBay and PayPal all dropped out of being a founder member of the Association.
The trio of MasterCard, Visa and PayPal dropping out is a massive blow for Libra's prospects of success, leading to some suggest that the project would be killed off before launch.
These companies would have had to invest at least $10 million in the foundation - essentially forming its initial cash reserves. For that cash, each of the founders could then form one of the nodes - essentially a bunch of servers - that will run the currency's transactions.
The Libra Association says the leaving founder members isn't a problem as it will be will be admitting new members soon. Libra claims over 1,500 companies are waiting to join. Apparently it would require a two-thirds majority to vote in any particular new member.
What's Facebook's input?
Facebook has established a standalone subsidiary called Calibra to manage its input into the Calibra Association - yes, that is potentially confusing.
Facebook's bit of Calibra will basically be a digital wallet that will use the Libra currency. Calibra will have its own standalone app but you'll also be able to use it to pay people within Messenger and WhatsApp as well as - presumably - Facebook itself. You can sign up for updates and be one of the first to use it at the link above.
Think of Facebook's Calibra effort as a competitor to PayPal.
Of course, Facebook's massive audience will ensure Libra gets exposure from the off. But while Facebook has a big seat at the table and has been heavily involved in the creation of the Libra Association, it doesn't appear to be a dominant one because of the way the foundation is structured.
It says that after the currency's launch it will have the same voting rights as other partners.
How will it work?
Calibra will let you send Libra to almost anyone with a smartphone "as easily and instantly as you might send a text message and at low to no cost". Facebook says that Calibra also hopes to offer people more banking-style facilities like paying bills and contactless payments on public transport and in coffee shops. Apple Pay is clearly in its sights, there, as potentially are other digital-heavy banks like Monzo and Revolut.
Libra is entirely open source, so while Facebook itself is making a wallet, it's pretty much assured that other wallets will compete with it and might even be more popular.
As we mentioned, there are some fees - there will likely be small charges that will be paid by sellers of goods and services but they may pass them onto the consumer.
What about security implications?
Calibra will keep your account information or financial data separate from Facebook itself "aside from limited cases" - Facebook says this would only be the case "to reflect our need to keep people safe, comply with the law and provide basic functionality to the people who use Calibra". Sounds like quite a lot of cases to us...
Certainly, with Facebook's security reputation at an all-time low it remains to be seen how convincing it can be on the topic. Certainly the creation of Calibra as a separate company is designed to assuage potential criticism. You can read its Customer Commitment here (PDF).
Facebook says that Calibra will be using the same verification and anti-fraud processes that banks and credit cards use "and we’ll have automated systems that will proactively monitor activity to detect and prevent fraudulent behaviour". There will also be live support to help if you lose your phone or password and there will be refunds for fraudulent use of your account.
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