Facebook is set to unveil plans to launch its own cryptocurrency on Tuesday, as the US technology giant takes on Bitcoin with an ambitious push into digital coins. The social network founded by Mark Zuckerberg network is expected to outline details of a virtual currency launching next year that it hopes will avoid the rollercoaster volatility of “blockchain” technologies such as bitcoin.
Facebook cryptocurrency Libra
Facebook is setting up a consortium called “Libra” which, according to the Wall Street Journal, has been joined by more than a dozen companies including Visa, Mastercard, PayPal, and Uber.
The scheme represents a boost for the cryptocurrency industry, which has been hampered by wild price swings in recent years and criticism that digital coins are used to launder money.
The companies along with venture capitalists and telecommunications firms will reportedly invest around $10 million each into the consortium.
The consortium is expected to have its own management structure because Facebook wants to bolster trust among users. The consortium will be managed externally and seek to build trust among consumers by pegging the virtual coin to a basket of currencies including the dollar and euro, the Journal said.
Facebook is thought to have won the backing of key governmental institutions such as the US Treasury and the Bank of England.
Ahead of the launch, it emerged that Facebook hired Ed Bowles, head of corporate and public affairs at financial services firm Standard Chartered, to join its team in September.
Regulators have been reticent about cryptocurrencies, not only due to potential abuse by criminals but the wild swings in their value harming consumers.
With more than two billion users across its platforms, which include WhatsApp and Instagram, Facebook could have the clout to bring cryptocurrency out of the fringes and emulate the likes of WeChat in China, where the US site is banned.
WeChat allows its users to chat, shop and play games without leaving its platform, generating more revenue by offering a one-stop portal.
Buffeted by the privacy storms, chief executive Mark Zuckerberg has promised a new direction for Facebook built around smaller groups, private messaging and payments.
But it will need to overcome questions of trust and privacy, not least over how financial data will be stored. Some analysts are betting that the heavyweight Libra consortium will help to do that.
Facebook’s crypto initiative could facilitate shopping, applications, and gaming, and would leverage its broad user base in Asia, RBC analyst Mark Mahaney said in a research note last week.
It “may prove to be one of the most important initiatives in the history of the company to unlock new engagement and revenue streams”, he wrote.
