Facebook uses cryptocurrency to provide financial services to people who don’t have access to banks

Facebook and 27 organisations have formed a non-profit association which aims to empower billions of people that are unbanked. The alliance will create a new digital currency called Libra that’s powered by blockchain technology and they plan to launch it in 2020. In a nutshell, it’s digital money that aims to be global, stable and secure.

It is estimated that 1.7 billion adults worldwide do not have access to conventional financial services and for those who have access, it can be slow and costly. A typical cross-border payment could take up to 5 days complete and it is reported that migrants lose US$25 billion each year in remittance fees. Despite the lack of access to financial services, most of these unbanked people own a mobile device.

Blockchain and cryptocurrency have been around for quite some time now and they promise to offer a cost-effective and faster way to transfer money across borders. However, existing blockchain systems are not yet mainstream and there are issues about price volatility and the lack of scalability.

The Libra Association which consists of a variety of companies from tech, telecommunication, blockchain, venture capital, payment and academic institutions, aims to build a new ecosystem that solves these issues as well as to allow flexibility to evolve over time. The development will include regulators and experts across the industry in order to ensure a sustainable, secure and trusted framework.

The new currency will be backed by Libra Reserve which has reserves of real assets. This will ensure low volatility and wider global acceptance of the digital currency.

In the coming months, the Libra association will be recruiting additional members and they will also raise money in a private placement to jumpstart the ecosystem and to drive adoption. Libra will also engage with regulators, policymakers and experts for feedback and to ensure that the new global financial infrastructure is governed properly. At the moment, the early stage code for Libra Blockchain will be made available as an open source under the Apache 2.0 license to gather feedback.

With this new alliance, Facebook wants to make it easy for everyone to send and receive money just like how anyone would send messages and photos. Next year, Facebook will introduce its own Libra digital wallet called Calibra and this will be integrated on WhatsApp and Facebook Messenger. Calibra will also be released as a standalone app. This will enable anyone with a smartphone to send and receive Libra and to make payments by simply scanning a code at low to zero cost. Apart from sending money, Facebook hopes to expand the usage of Libra to pay for bills, goods or even public transport.

According to Facebook, Calibra will be regulated like any other payment service providers. This means it has to comply with privacy and security standards which include fraud and risk management. If you’re not comfortable with Facebook’s Calibra, there will be other digital wallets that you can use to manage your Libra cryptocurrency. Apart from Facebook, other association members will also build their own services using Libra and this also includes payment companies such as Mastercard, PayPal and Visa.

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