GENEVA (AN) — Facebook announced plans on Tuesday to launch a new digital currency and a new international organization to oversee it headquartered in Switzerland, a global hub of multilateralism and emerging Bitcoin-like cryptocurrencies.
The social network's new Libra cryptocurrency is to be managed by the new Libra Association, headquartered in Geneva, home to the United Nations' European headquarters and hundreds of other international organizations, treaty secretariats and nations' diplomatic missions.
The project is part of a new subsidiary dubbed Calibra "whose goal is to provide financial services that will let people access and participate in the Libra network," Facebook said in its announcement, adding that the organization overseeing Libra will remain independent of Facebook by answering to other companies.
The first product that the subsidiary plans to launch next year is a digital wallet for Libra — a digital coin to be powered by blockchain technology — that will be available in Messenger, WhatsApp and as a standalone app, the social networking behemoth said. It is named after a basic Roman measurement of weight.
Facebook also issued a white paper to accompany its announcement that explains how it is creating the Libra Association as an independent, not-for-profit membership organization.
"The association’s purpose is to coordinate and provide a framework for governance for the network and reserve and lead social impact grant-making in support of financial inclusion," the company said. "Switzerland has a history of global neutrality and openness to blockchain technology, and the association strives to be a neutral, international institution, hence the choice to be registered there."
Switzerland already is home to hundreds of blockchain companies. The nation is vying to become a global hub for the industry; its financial and commodities center around Zurich and canton Zug has been expanding in recent years to become a self-fashioned Crypto Valley employing thousands of people.
Facebook said the members of the Libra Association would be geographically distributed and selected to include "diverse businesses, nonprofit and multilateral organizations, and academic institutions." Their initial work would be to create the association’s charter, qualifying them as “founding members."
Switzerland's financial regulatory agency, FINMA, which is based in the Swiss capital Bern and oversees Swiss banks, would be the government entity in charge of regulating the cryptocurrency.
The value of the Libra is to be pegged to the U.S. dollar, euro, yen and other major currencies, and it would be stabilized with the backing of what Facebook calls "the Libra Reserve," a collection of global currencies and other assets that would be used as collateral for every Libra that is created.
Facebook said it has signed on 27 other business partners so far that will be involved in the project including MasterCard, PayPal, Spotify, Uber and Visa.
Other financial services 'out of reach'
A new global digital currency created by the world's largest social network, linking more than 2.7 billion monthly users, could have big repercussions for global banks and national currencies. Facing a major public backlash over its commercial uses of personal customer information, Facebook emphasized that Calibra would not share data user transactions with the rest of the company unless it is required to do so by law.
"Aside from limited cases, Calibra will not share account information or financial data with Facebook, Inc. or any third party without customer consent," the company said. "For example, Calibra customers’ account information and financial data will not be used to improve ad targeting on the Facebook, Inc. family of products. The limited cases where this data may be shared reflect our need to keep people safe, comply with the law, and provide basic functionality to the people who use Calibra."
That pledge might receive a harder look in the coming days, however, as a U.S. federal investigation digs into Facebook's privacy practices and Congress examines antitrust issues with the big tech companies. There was immediate skepticism on social media about whether Facebook could be trusted with the privacy matters and additional powers of carrying out bank-like financial transactions.
"After all that’s transpired, and all we know about Facebook’s data practices and cyber vulnerabilities, why on Earth would we trust Facebook to serve as a virtual bank with its own currency?" asked Phillip Carter, a lawyer and RAND Corporation senior policy researcher who teaches national security business law at Georgetown University.
Despite the obvious potential to expand its brand, which now includes Instagram and WhatsApp, California-based Facebook said it had more lofty motives for wanting to introduce billions of new users to the world of digital coins.
"For many people around the world, even basic financial services are still out of reach: almost half of the adults in the world don’t have an active bank account and those numbers are worse in developing countries and even worse for women," the company said, citing figures from the World Bank and Bill & Melinda Gates Foundation.
"The cost of that exclusion is high — approximately 70% of small businesses in developing countries lack access to credit and US$25 billion is lost by migrants every year through remittance fees," it said, citing UNESCO figures. "This is the challenge we’re hoping to address."