Facebook announces new crypto-currency Libra

How exactly will Libra work?

As of right now, it’s not absolutely clear how Libra will function. We know that the service will allow payments to be made through Messenger and WhatsApp, and will be independently managed.

Facebook users will be able to buy Libra currency through the platform directly. They’ll then be able to send currency as ‘easily and instantly as you might send a text message’. The company has hopes to increase functionality with time and allow transactions such as bill payments, train season tickets, and small purchases to be made via a code or simple touch.

Keep in mind that Libra is not like Apple or Google Pay, and is not just a means of using contactless payment on an existing bank account. This will be an entirely new currency with its own assets. You’ll need to purchase units of Libra with normal money.

Should we really trust Facebook with our money?

Facebook is doing all it can to make this new project trustworthy – 28 large brands have backed the currency and Zuckerberg has stated the company is working in accordance with governments and central banks, including the US Treasury and Bank of England.

It’s worth noting that Libra will be managed independently by a group of companies and charities, of which Facebook is only one. Telecoms companies, payment firms, and digital businesses will all have a hand in the running of Libra under the ‘Libra Association’.

For anyone who’s kept up with Facebook’s activity recently this shouldn’t come as much of a surprise. Data mishandling has been at the heart of its public image for quite some time. Libra is being pitched as a noble investment to help the underfinanced rather than a means of growing the company’s already extremely large empire.

Despite all of this, though, we still don’t know how exactly Libra will be regulated, nor do we have any information on how it will combat piracy and scammers.

The Financial Times has argued that Facebook’s apparent attempt to help the underfinanced is misplaced, needlessly creating a new currency under the guise of charity. Libra may tackle the issue of unbanked people by simply offering them a cheaper bank, but the issue goes much deeper and is an inherently sociological challenge.

Actual charities already exist to study and combat the underbanked issue, such as Kenya’s Mpesa scheme and WorldRemit. Studies on the underbanked indicate that over a third do not have enough money to put into a bank. It’s not necessarily fees or expensive transactions that are causing problems – people are simply too poor.

To meaningfully create change, Facebook would have to pour hefty amounts of resources and funding into the education and infrastructure of developing countries, something it’s unlikely to do in the immediate future. Simply creating a new way to pay that’s more internationally focused will not help a large chunk of underbanked people.

What could Libra mean for you?

Where Libra could thrive, however, is with younger customers and Messenger users. Contactless pay and smartphone transactions have slowly but surely phased out our need for cash on a day-to-day basis. Facebook’s move into the crypto-currency marketplace could be an inevitable step toward a completely online banking world.

Cheap international fees and simple payments between friends is also likely to be a feature that many find genuinely useful, and could wind up being one of Libra’s main selling points in richer countries. With VISA, Uber, and others getting on board with the new currency, we’re likely to see in-app purchases become even easier.

Microtransactions will be quicker, and moving digital credit between devices and accounts will no doubt become even less of a headache. Put simply, Libra has the potential to be fast, convenient, and useful, qualities that will appeal to a generation already fairly used to their online data being stored and sold.

We’ll just have to wait and see where Zuckerberg’s crypto-currency goes. Facebook has the opportunity to redeem themselves and provide genuine social change that goes beyond analytics scandals. While it’s not clear just yet who exactly will be laughing all the way to the bank (all bets on Z-berg), it’s obvious that Libra could help businesses and offer a quicker way to manage money. Let’s just hope that Facebook stays true to its word.