MENLO PARK, Calif.–Facebook is expected to announce this week it will back a new cryptocurrency, with more than a dozen companies, including Visa, Mastercard and PayPal, among the backers.
The new cryptocurrency, or digital coin, is to be called Libra and will roll out in 2020, according to reports. As CUToday.info reported here, rumors that Facebook would be entering the digital coin business have circulated for some time.
According to the Wall Street Journal, the financial and e-commerce companies, venture capitalists and telecommunications firms will invest approximately $10 million each in a consortium that will govern Libra. The money would be used to fund the creation of the coin, which will be pegged to a basket of government-issued currencies to avoid the wild swings that have dogged other cryptocurrencies, sources told the Wall Street Journal, which had earlier reported Facebook is looking to raise as much as $1 billion for the effort.
“In the works for more than a year, the secretive project revolves around a digital coin that its users could send to each other and use to make purchases both on Facebook and across the Internet,” the Journal said. “It isn’t known, even to some members of the consortium, how the coin will work or what their roles will be, people familiar with the project said. Regulatory hurdles in the U.S. and elsewhere are high.”
According to the Journal report, Facebook won’t directly control the coin, nor will the individual members of the consortium—known as the Libra Association. Some of the members could serve as “nodes” along the system that verify transactions and maintain records of them, creating a brand-new payments network, according to people familiar with the setup, the Journal said.
Other companies that have reportedly signed on include Uber and Booking.com.
The Appeal of 2.4-Billion Users
“Keeping the cryptocurrency network separate from Facebook’s platform gives the social-media company some cover with users and regulators should problems arise, a big advantage at a time when it is under pressure to address privacy shortcomings,” the Journal added. “Yet Facebook, as the developer of the underlying technology, could exert considerable influence over it.”
Facebook, which approximately 2.4-billion monthly active users, plans to release a white paper introducing the coin this week, according to the Journal.