This week, Facebook unveiled plans for a new digital currency powered by blockchain technology.
The currency, Libra, will be managed in a ‘Calibra’ digital wallet, which can be accessed in Messenger, WhatsApp, and as a standalone app.
Facebook expects the currency to launch in 2020.
The tech giant has pitched the venture as a move to improve access to financial services. It stated: “For many people around the world, even basic financial services are still out of reach: almost half of the adults in the world don’t have an active bank account and those numbers are worse in developing countries and even worse for women.
“The cost of that exclusion is high — approximately 70% of small businesses in developing countries lack access to credit and $25 billion is lost by migrants every year through remittance fees.”
It is not specified how exactly Facebook’s Libra will target these issues.
Pre-empting the obvious concerns that Libra would incite, Facebook stated that Calibra will use rigorous anti-fraud processes and protect consumer privacy. The subsidiary will not share account information or financial data with Facebook, apart from where there is a “need to keep people safe, comply with the law and provide basic functionality to the people who use Calibra.”
Despite Facebook’s assurances, US Democratic congresswoman Maxine Waters has urged the company to delay its launch of Libra so that the US Congress can examine the project. Waters, who is chairwoman of the House of Financial Services Committee, cited Facebook’s less than stellar record in user privacy among her concerns.
In the UK, the Financial Conduct Authority (FCA) released a report which said: “While fintechs are financial services firms aiming to use technology to deliver products in a more efficient and consumer-friendly way, technology companies themselves are increasingly pushing into financial services.”
Amazon has launched a lending business, while Apple is partnering with Goldman Sachs to launch a credit card.
The FCA report continued: “The boundary between providing mostly unregulated technical infrastructure to deliver financial services and providing regulated activities is increasingly narrowing. This also raises questions around whether financial regulators have the necessary tools and techniques to effectively oversee those organisations.”
Andrew Bailey, Chief Executive Officer of the FCA, said in a separate statement: “We appreciate that the current perimeter is complicated. The boundary between which firms and activities do or don’t require regulation is being constantly tested. The recent behaviour of some firms operating around the perimeter has caused serious consumer harm and reduced trust in regulated financial services markets.”