Facebook to launch new cryptocurrency

Facebook CEO Mark Zuckerberg
Facebook CEO Mark Zuckerberg
Image: REUTERS/Aaron P. Bernstein/File Photo

Facebook is set on Tuesday to unveil a bid to bring cryptocurrency payments into the mainstream, reportedly with the endorsement of governments and financial giants.

The world’s biggest social network is expected to outline details of a virtual currency launching in 2020 that it hopes will avoid the rollercoaster volatility of “blockchain” technologies such as bitcoin.

Facebook is setting up “Libra”, a consortium called which, the Wall Street Journal said, had been joined by more than a dozen international companies, including Visa, Mastercard, PayPal and Uber.

The companies, along with venture capitalists and telecommunications firms, will reportedly invest about $10m (R148m) each into the consortium.

Facebook has been trying to ward off hostile regulatory scrutiny after a series of privacy abuses and the spread of fake news.

The consortium would be managed externally and would 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 had already sought the blessing of the US Treasury and the Bank of England, the BBC reported in May.

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, CEO Mark Zuckerberg has promised a new direction for Facebook built around smaller groups, private messaging and payments.

But it will need to overcome a number of questions over 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.

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