Last June, Facebook unveiled a “global digital currency” called Libra.
In October, CEO Mark Zuckerberg promised the US Congress that the Libra will extend US financial leadership, democratic values and control around the world.
A priori the launch of the Libra on Facebook has become geopolitical.
Indeed, just a few days after Facebook‘s announcement, an official of the People’s Bank of China hinted that it would accelerate the development of its own digital currency in response to the launch.
China is poised to become the first major economy to issue a digital version of its currency.
Chinese leaders see the Libra, which is supposed to be backed by a reserve mainly made up of U.S. dollars, as a threat: it could reinforce America’s disproportionate power in the global financial system, which stems from the dollar’s role as the world’s de facto reserve currency. Some suspect that China is trying to promote its digital renminbi internationally.
Let us return to this new crypto-money:
A new non-profit group based in Geneva, the Libra Association, will oversee the currency, called Libra. It will initially be supported by the expertise of Facebook, but will be governed by 28 founding partners, including the payment companies Visa and Mastercard and the Internet companies eBay, Spotify and Uber.
Facebook has said it wants the currency to be available from the first half of 2021 and believes that many of the 2 billion people who already use the company’s services will one day regularly use the new currency to buy goods or send money abroad.
The project would provide access to smartphones around the world, potentially creating a way to easily transfer money, build up credit and pay bills while avoiding costly fees.
For example, a consumer could buy Libras using dollars and keep them in a digital wallet. This balance could then be sent to a family member via WhatsApp messenger or used to pay a bill in a foreign country without having to worry about the exchange rate.
The Libra, whose name is derived in part from a Roman unit for weight and currency, will resemble Bitcoin, but will also have some key differences – including the fact that it will be governed by a central authority and its value will be linked to other assets.
This reserve will be made up of real assets with low volatility, such as bank deposits and government securities in foreign currencies from central banks. This will make this cryptocurrency based on a relatively stable blockchain compared to the notoriously fluctuating value of Bitcoin and the Libra could offer an alternative to currencies that experience hyperinflation in the event of a crisis. Facebook has said it plans to offer financial services, perhaps one day loans, through a new subsidiary specializing in this cryptography.
Jamie McCormick, managing director of Bitcoin Marketing, said that “Every cryptomony needs a critical mass to succeed, and you can’t have a critical mass bigger than Facebook’s“.
Mr. McCormick welcomed this new competitor and described Libra as a “very interesting development that will legitimize this industry“.
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