On 18 June Facebook announced it will be launching an innovative global currency named Libra to mixed reactions from news sites and financial experts across the world.
In the UK, the Bank of England has issued a cautious but positive welcome to the move, although Mark Carney, Governor of the Bank, said that advance regulations will need to be in place to protect consumers and ensure money laundering does not become a major issue.
Not All Positive
Commentators in the United States have not been so welcoming of the proposed new digital currency. An article in the New York Times on 19 June pointed out several inherent risks and problems with the launch of any new currency like Libra.
Meanwhile the Chair of the US Congress Financial Services Committee has urged Facebook to delay launching Libra until after regulators have fully examined all proposals.
The Libra Currency
Facebook plans to launch Libra in partnership with a number of other powerful tech corporations, including PayPal, Spotify, Uber and VISA.
An organisational spokesperson said:
“We believe that the world needs a global, digitally native currency that brings together the attributes of the world’s best currencies: stability, low inflation, wide global acceptance and fungibility.”
It’s believed the new system will be created using blockchain technologies and Facebook is launching the subsidiary business, Calibra, to facilitate the provision of financial services.
The overall currency standards are likely to be set and managed by the Libra Association, which is a non-profit business based in Switzerland.
A central bank called the Libra Reserve is also planned and will be headed up by representatives from all participating partnership businesses.
The difference between Libra and digital cryptocurrencies is that all of Libra’s funding will be backed up by reserves held in its central bank.
For example, if a consumer purchases £10 of Libra currency, the cash will be held within the bank to honour all outgoing payments that will need to be made when customers sell their Libra currencies.
One main advantage of the new currency is that it will be extremely user-friendly, with embedded links within sites such as Facebook and WhatsApp.
This will make it easier to arrange global purchases and money transfers, and international share dealers could find it cuts dealing costs considerably. However, Facebook has not yet issued enough information to confirm whether or not this will be the case.