Facebook Announces Plans For Libra, Its Own Cryptocurrency
AUDIE CORNISH, HOST:
Facebook announced today it's creating a currency that could be available next year to its 2 billion-plus users worldwide. People who use Facebook apps like WhatsApp and Messenger could make and receive payments with the new currency. NPR's Aarti Shahani has more.
AARTI SHAHANI, BYLINE: An estimated 1.7 billion adults on Earth do not have a bank account. When members of this global underclass try to send money to family or pay a bill, they can get slapped with huge fees. Facebook could have solved that problem by saying, hey, whatever country you're in, we'll let you have a wallet on Facebook based on that country's currency - say, the dollar, the Indian rupee, the Brazilian real. And we'll let you basically text money to other people for very cheap. That is not what Facebook did.
DARRELL DUFFIE: They're creating a cryptocurrency. Nothing like this has been tried on this scale.
SHAHANI: That's Darrell Duffie, finance professor at Stanford Graduate School of Business. Cryptocurrency is digital money not issued by a central bank or any country's government. The most popular one to date is bitcoin. The value of cryptocurrencies can fluctuate wildly by thousands of dollars in the span of months.
DUFFIE: It is true that bitcoin is a wild ride for anybody that's bought or sold it in the past. But this is not at all like bitcoin.
SHAHANI: The Facebook currency, which is called Libra, is being created through a non-profit association based in Switzerland. Partners include Lyft and Uber, Visa and MasterCard. The Libra is different from bitcoin in one key respect. The Libra will be backed by real assets - a basket of bank deposits and short-term securities from different governments, not just the U.S.
DUFFIE: But having said that, this basket of currencies will be relatively stable.
SHAHANI: That's what Duffie believes. Mark Williams is less optimistic. He's a finance professor at Boston University. In the U.S., the dollar is backed by the full faith and credit of the U.S. government, and the currency is widely trusted. Williams says Facebook has been exposed repeatedly for failing to meet its promises - for example, with privacy.
MARK WILLIAMS: Can this entity really perform the service of a government, of a central bank and maintain the trust?
SHAHANI: The Libra is an ambitious experiment to make cryptocurrency mainstream. No other cryptocreator has started with such a massive user base. Facebook critics and even the company's CEO, Mark Zuckerberg, have expressed concern about how much power Facebook has over speech, online expression, information flow. If Libra succeeds, the tech giant amasses a new kind of power - financial. Here's Darrell Duffie.
DUFFIE: It keeps them independent of the banks. That's probably another reason to do it. They don't need to rely on the banks to run this.
SHAHANI: Facebook has also left the door open to data tracking. Company statements indicate that if customers give consent, Facebook and other parties can collect and track Libra transactions, see how people spend, use that business intelligence against competitors and to target ads - Williams.
WILLIAMS: Again Facebook wins. So is privacy maintained - no. Is a new currency created - yes. Does it benefit Facebook - yes. So that doesn't sound very altruistic to me.
SHAHANI: A senior U.S. lawmaker, Representative Maxine Waters, who chairs the House Financial Services Committee, says Facebook should halt development of this new cryptocurrency until Congress and regulators are able to conduct a review. Aarti Shahani, NPR News.
NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.