It is no longer news that Facebook, popular social media and social networking company has announced that it will, in 2020, launch its global crypto-currency called the Libra coin; built on blockchain technology to promote financial inclusion.
In simple terms, the Libra coin will allow for individuals everywhere in the world to trade and transact with a digital currency that is secure, stable, fast, mobile and cheap. Imagine being able to send money to family and friends or paying for goods and services anywhere in the world without having to pay exorbitant bank transfer charges, or losing value due to currency exchange. This is the opportunity Libra promises due to the fact that the crypro-currency, unlike Bitcoin, is essentially a stable coin, as it is pegged to government-issued currencies such as the US dollars, Euros, British pounds, Singapore dollar, etc.
BusinessDay was in London last week to meet with Betrand Perez, COO, Libra Association and some members of Calibra who spoke extensively on the prospects of Libra in financial and economic development. Here are ten important things to know about the Libra coin before its launch in the second half of 2020;
1. Libra coins will be backed by financial assets such as a basket of currencies. Users will be able to exchange Fiat currency into these digital currencies and use them for online transactions. Libra also relies on all those currencies in the basket, in the sense that it will rely on monetary policies of those central banks. Monetary policies from central banks of currencies in the fiat basket will instantly reflect on the price of the Libra coin.
2. Libra will significantly decrease fees currently charged by banks to send and receive money. It will also impact the speed of money transfers and lessen the time with the existing remittance corridors.
3. Christina Smedley, VP, brand and marketing for Calibra, one of the 28 members of the Libra association told BusinessDay that data that customers share with Libra will not be shared with Facebook. “There are some fraud measures that we put in place just to make sure that the community is protected and will enable us to detect when bad activities are happening on the network. This proposed launch is at least a year away, so there’s a lot that we still need to sort out,” she said.
4. The Libra Association is made up of reputable partner companies such as Mastercard, Visa, PayPal, Uber, and many others. These companies shall work together to ensure payment processes are faster, more accurate, and safer than existing financial technology by using blockchain technology.
5. Libra has not yet been licensed by any regulator in any country to operate, however, the association is already in talks with regulators and central banks around the world including Switzerland and Singapore. “The Swiss regulator has stated that we should be regulated as a payment system and so we are going to apply as a payment system,” Betrand Perez, COO, Libra association said.
6. At first, Libra will only be available in the Facebook messenger app and WhatsApp. With the other partners in the Libra Association, it is accepted that those companies will find ways to integrate Libra payments. “We have announced from the Facebook site, the commitment to build a wallet which will be available in messenger and WhatsApp and on Facebook products. What’s important to remember is that it would be interruptible with other wallets so other people who are building on the blockchain will be linked,” the association said.
7. Right now there is no value for the Libra coin, as the basket has not been defined and it is too early to say how much Libra coin would be worth a particular amount of dollars or euros.
8. 50 percent of Facebook Libra’s basket will be on the us dollar, the remaining portion will consist of Euro with 18 percent, Yen with 14 percent, British Pound, 11 percent and the Singapore dollar with 7 percent. Surprisingly, the basket will not include the Chinese Yuan, the currency of the world’s second largest economy.
9. Libra is not an investment or speculative asset, so when you buy a Libra coin, that will not grant you any right on returns. “When you want to acquire coins, we would receive your currency e.g. Euros, and put them in the reserve in exchange for the Libra coins. So, the reserve will fill itself from the purchases of the coins, there is no monetary creation,” the association said.
10. Libra doesn’t expect to get all of Facebook’s audience, as users will have to submit documentation for KYC checks, hence there would be a gradual build up of people. The association will be responsible for the reserve and would be working with authorised resellers that will sell and buy from customers. It will also ensure is that the exchanges are highly regulated in the geographical countries where they provide services.
