Facebook Unveils Libra Cryptocurrency, Targeting 1.7 Billion Unbanked

You don't have to have a Facebook account to use Libra.

That's the hands-off approach the social media giant is working toward as it announces its new blockchain and the token of the same name that will run on top of it.

While Tuesday's announcement is still early days, the scope of the project is far-reaching. It includes a new Facebook subsidiary, Calibra, and an independent consortium, Libra Association, backed by some of tech's biggest names.

“Implied in this project is that wherever the Visa or Mastercard logo are accepted, Libra would follow suit," Dante Disparte, head of policy and communications for the Libra Association, told CoinDesk in an exclusive interview. "In so many ways it’s a great leap forward for cryptocurrencies and, in many respects, a mainstreaming of this asset class.”

The Libra Association's group of 28 founding members includes Visa, Mastercard, PayPal, Uber, Lyft, Coinbase and others.

Customers interested in holding or transferring Facebook's newly-announced Libra token will be given a number of options to do so, the company announced Tuesday, with an initial focus on international remittances.

Calibra

will develop financial services and products around the Libra network, which will eventually be fully governed by the independent Libra Association. Calibra intends to start with a digital wallet for the Libra coin, which will let users transfer funds to each other, as well as store their tokens locally.

Notably, customers will be able to access the wallet functionality through a new standalone app on iOS and Android, or through Facebook's Messenger and WhatsApp services. The Libra blockchain is expected to launch in full sometime next year.

“The central goal here really is financial inclusion," Disparte told CoinDesk.

Reaching the unbanked

Access to these apps could be enormously significant. WhatsApp saw 1.5 billion active monthly users in the fourth quarter of 2017, according to TechCrunch. Globally 1.7 billion adults remain unbanked. The new effort is explicitly branded to reach those populations.

“The goal of this new project ... is to build a financial ecosystem that can plug in and empower billions of people,” Disparte said.

For the major tech companies and financial institutions backing the project, that may one day mean access to more customers; for those struggling to access capital, it may one day mean a new lifeline from family abroad.

"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," Calibra wrote in company literature published Tuesday, adding:

"The cost of that exclusion is high – for example, approximately 70 percent of small businesses in developing countries lack access to credit, and $25 billion is lost by migrants every year through remittance fees."

Among the payments giants, a number of NGOs are involved in the Libra Association, including Creative Destruction Lab, Kiva, Mercy Corps and Women’s World Banking. To become a “Social Impact Partner," participating non-profits must have a five-year track record of poverty alleviation work, including digital financial inclusion initiatives in the field, and an operating budget of greater than $50 million.

While Calibra is only targeting basic fund transfers to begin with, the subsidiary plans to expand its services to allow customers to pay bills and purchase goods or services, such as coffee or public transit access.

A video demonstrating the planned user interface indicates that customers will be able to quickly send funds to their friends. While they will be sending Libra coins, the app appears to show that users will see their balance in their local fiat currency.

Further, when sending funds across borders, the app appears to show the fiat equivalent that recipients will see, with amounts denominated in their local currencies.

“Just as the internet created a world of low-friction communication and information sharing, the hope with this public ecosystem and public utility is that we can create a world of value transfer and payment that has an equal low-friction property to it without sacrificing the governance standards in the traditional economy,” Disparte told CoinDesk.

Regulatory compliance

As part of its services, Calibra intends to follow various anti-money-laundering and know-your-customer regulations in the jurisdictions in which it conducts business, according to a fact sheet.

Calibra registered as a money service business with the U.S. Department of Treasury and is now working to acquire money transmitter licenses in U.S. states "that treat cryptocurrencies as the equivalent of money."

The subsidiary also intends to follow guidelines issued by the Financial Action Task Force and other national regulators, and will not conduct business in jurisdictions which have banned cryptocurrencies outright.

"Calibra is committed to keeping illicit activity off the platform and working with law enforcement globally," the fact sheet said.

As part of its efforts to maintain compliance, Calibra will require ID verification. However, financial data and social media profiles will not be linked, according to company officials and the Libra white paper.

“The Libra protocol does not link accounts to a real-world identity," the white paper states. "A user is free to create multiple accounts by generating multiple key-pairs."

Other wallet providers will be able to build products on the Libra protocol when the network launches in early 2020, Facebook officials told CoinDesk.

The Calibra wallet will use similar verification and anti-fraud procedures that banks and credit card providers currently use, as well as systems to monitor accounts for unusual behavior in order to prevent fraudulent activity.

"Authorities charged with consumer protection have an important role to play in ensuring that all consumers, including the most vulnerable, can safely take advantage of financial innovation," the fact sheet says.

Daniel Kuhn contributed reporting.

Calibra screenshots courtesy of Facebook