Facebook to Launch Cryptocurrency, ‘Globalcoin’

Facebook is planning to launch its own cryptocurrency, likely to be named GlobalCoin. The currency would initially be launched in just around a dozen countries and Facebook may start testing it by the end of this year.

What is Cruptocurrency?

• Cryptocurrency is an encrypted decentralized digital currency transferred between peers and confirmed in a public ledger via a process known as mining.

Steps taken by Facebook

• Facebook is planning to have physical portals for users to purchase the cryptocurrency, which, according to previous reports, is called GlobalCoin. It is finally code named as Libra.
• Facebook has registered a company called Libra Networks in Switzerland for financial services, Reuters reported. Libra could be a play on the word LIBOR, an abbreviation for the London Inter-bank Offered Rate that’s used as a benchmark interest rate for borrowing between banks. LIBOR is for banks, while Libra is meant to be for the people.
• The cryptocurrency will be a stablecoin — a token designed to have a stable price to prevent discrepancies and complications due to price fluctuations during a payment or negotiation process. Facebook is working with various countries to pre-approve the rollout of the stablecoin.

Advantages of Libra

• Libra could unlock a new era of commerce and payments for the social network.
• It is apparently aimed to allow users to make transactions via the social media platform, and might also be offered to Facebook employees who want to be paid in the cryptocurrency.
• It could be used to offer low or no-fee payments between friends or remittance of earnings to family’s from migrant workers abroad who are often gouged by money transfer services.
• Sidestepping credit card transaction fees could also allow Facebook’s cryptocurrency to offer a cheaper way to pay merchants for traditional ecommerce, or facilitate micro transactions. And a better understanding of who buys what or which brands or popular could aid Facebook in ad measurement, ranking, and targeting to amplify its core business.
• It will be transferrable with zero fees via Facebook products including Messenger and WhatsApp.
• Facebook also wants to roll out physical devices for ATMs so users can exchange traditional assets for the cryptocurrency.

Governance issues

• Facebook is in talks to create an independent foundation to oversee its cryptocurrency.
• It’s asking companies to pay $10 million to operate a node that can validate transactions made with its cryptocurrency in exchange for a say in governance of the token.
• It’s possible that node operators could benefit financially too. By introducing a level of decentralization to the governance of the project, Facebook may be able to avoid regulation related to its holding too much power over a global currency.

Risk associated with Libra

• Digital currencies, being in electronic format, are prone to losses arising out of hacking, loss of password etc. This step by Facebook will drop the secrecy and will lead to lack of privacy for example if someone is browsing, then Facebook can collect such data and track every dollar spend by that person, which is threat to privacy.
• The exchanges are located in various parts of the world, making the law enforcement a tricky thing for the multiple jurisdictions available.
• This can easily be used for illegal activities anonymously.

Way Ahead

• Facebook may further set up physical portals for users to purchase the cryptocurrency.
• Facebook is working with merchants to accept the token as payment, and may offer sign-up bonuses.