Facebook to launch digital currency, 'libra'

Facebook's Calibra
Facebook's Calibra app will act as a virtual wallet for the new digital currency. Copyright Facebook
By David Ingram and Tom Costello with NBC News Tech and Science News
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The project is the biggest step of any major corporation into the emerging realms of digital currency and blockchain technology.


SAN FRANCISCO — Facebook is going into the banking business.

The social networking company on Tuesday said it plans to help launch a digital currency in 2020, marking one of the company's most aggressive moves yet to push beyond digital advertising.

A new nonprofit group based in Geneva, the Libra Association, will oversee the currency, called "libra." It will initially be backed by Facebook's expertise but governed by 28 founding partners including payment firms Visa and Mastercard and internet companies eBay, Spotify and Uber.

Facebook said that it wants the currency to be available starting the first half of next year and that it believes many of the 2 billion people who are already on the company's services will one day regularly use the new currency to buy things or send money internationally.

"The motivation for this is to effectively enable a simple global currency and financial infrastructure that empowers billions of people," Dante Disparte, head of policy and communications for the Libra Association, told NBC News.

The project is the biggest step of any major corporation into the emerging realms of digital currency and blockchain technology, representing a vote of confidence that experiments in new forms of digital payments could be more than a passing fad. Blockchain is a decentralized system in which computers each contribute to a shared public ledger, allowing for secure transactions without a central authority.

Libra, named partly after a Roman unit for weight and currency, will have echoes of bitcoin, the popular cryptocurrency, but also some key differences — most notably that it will be governed by a central authority and that its value will be tied to other assets.

Facebook said it plans to offer financial services, possibly one day including loans, through a new subsidiary that specializes in libra.

The price of bitcoin has rallied above $9,000 in recent days, the highest in more than a year, as news reports about Facebook's plans raised expectations for digital currencies.

"Any cryptocurrency needs critical mass to have success, and you can't have more critical mass than Facebook," said Jamie McCormick, managing director of Bitcoin Marketing, which helps companies launch products and services using cryptocurrencies. McCormick called libra, "a very interesting development that will legitimize the industry."

Facebook said it would keep data about people's financial transactions separate from data about social networks, so that libra information would not be used to target advertising on Facebook or Instagram.

Libra will not be exactly like bitcoin or other so-called cryptocurrencies that began emerging a decade ago. Cryptocurrencies are known for their decentralized nature, existing outside any central authority such as a government or large, corporate association.

And the libra's value will be pegged to a reserve of real, low-volatility assets, making it relatively stable compared to the notoriously fluctuating value of bitcoin, according to Facebook and the Libra Association. The reserve, or "basket," will have assets "like bank deposits and government securities in currencies from stable and reputable central banks," Facebook said.

The libra could be useful to people who don't have easy access to banking services or cash, such as people in crisis immediately after a natural disaster or other unstable situations, said Pete Lewis, a spokesman for Mercy Corps, a humanitarian organization that signed up as one of the 28 founding partners for the Libra Association.

"A low-volatility currency could provide financial stability for people struggling with conflict," Lewis said in an interview, adding that the libra could give people an alternative to currencies that are experiencing hyperinflation in a crisis.

Some people, though, may not want to keep their savings in a currency outside their local one. New York University economist Nouriel Roubini said on Monday that there would be "significant currency risk" for people using the "FB Coin."

"Most consumers are local and think/pay local and don't want currency risk related to using a coin that is a basket of global currencies," Roubini wrote on Twitter.

Facebook investors and others who watch the company closely have expected the company to consider a digital currency or something like it since at least May 2018, when the company opened a division to focus on blockchain, the technology that makes cryptocurrencies possible through records kept on far-flung computers.


Transactions made with libra will be recorded in a blockchain designed to handle billions of possible accounts, according to a 12-page white paper outlining the plan. Facebook engineers designed the blockchain, but the technology will be open-source, meaning others may contribute to it, the white paper says.

Central to the thinking behind libra is that a wide array of companies, not just Facebook, will be involved in decision-making and begin offering for-profit services related to the currency, Disparte said.

"This will start to develop a wave of responsible financial innovation," he said.

Money transfers, though, have become a competitive business. In addition to established players such as Western Union, apps like Venmo, TransferWise and Remitly offer ways to send money overseas, at various speeds and costs.

Facebook said it plans to begin offering accounts next year through a new subsidiary called Calibra, echoing the name of the new currency. Calibra will be a digital wallet that will allow people to send money in the form of libra "at low to no cost," the company said. Calibra will be integrated into through Facebook's WhatsApp and Messenger services.

Facebook\'s Calibra app will act as a virtual wallet for the new digital currency.
Facebook\'s Calibra app will act as a virtual wallet for the new digital currency.Facebook

WhatsApp and Messenger are central to Facebook's future, as CEO Mark Zuckerberg tries to respond to a shift in how people spend their time — away from public news feed posts toward private messaging.

"We want sending money to be as easy as sending a text message," Kevin Weil, vice president of product for Calibra, said in an interview.

He said the average cost now to send money worldwide was 7 percent, and that a lower transaction cost could eventually mean lower prices for services such as Uber rides.

Facebook declined to say how much the company has spent on the digital currency effort, but Weil said financial services could be an important part of Facebook's business if libra proves popular.

Initially, "the whole goal will be around driving adoption," he said. "If we're successful at that, we think there will be other opportunities to provide financial services to people that would be a business to us."


Disparte said that the Libra Association wants to have 100 organizations as partners by the time the digital currency debuts.

Each of the partners will have equal voting power, although Facebook "is expected to maintain a leadership role through 2019," according to the white paper.

In addition to the Roman unit of measure for weight that was associated with coins, the name, he said, also comes from the astrological sign represented by balanced scales and partly by the French word "libre," meaning freedom. "You have money, justice and freedom, and that really is the spirit of this new project," Disparte said.

Facebook is offering employees working on Libra the option of being paid in the currency, The Information, a tech news website, reported this month.

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