Visa, MasterCard, PayPal and Other Major Companies Backing up Facebook’s New Cryptocurrency
The social media giant is recruiting financial companies and eCommerce firms to back up the launch of Facebook’s mysterious blockchain plan called “project Libra.”
According to the Wall Street Journal’s report, the project is getting support from companies such as PayPal, Visa, MasterCard, Uber, and other major players, though it’s still unknown what role these businesses will play. After several indirect clues that the plan has finally been set in motion, Facebook has made it public that it intends to unveil its cryptocurrency next week and launch it next year. Allegedly, each of the partner firms invested $10 million into the project and created a governing body called the Libra Association.
The Libra Association will not have direct control over the new cryptocurrency, and neither will Facebook. They plan to enlist around 100 organizations to act as “nodes” in the network in order to limit any single company’s control over the value of the currency.
Facebook intends to market the currency primarily to developing countries, where traditional financial institutions are unreliable, and charge extortionate fees for cross-border remittance. Caitlin Long, a Forbes writer and blockchain advocate, claims that the new “cryptocurrency will be a powerful force for good in developing countries.” Given that third world countries often have unstable fiat currencies, Facebook could provide a store-of-value that is more reliable than the government-backed currencies.
The Facebook coin will be tied to several currencies and low-risk securities instead of just the U.S. dollar, and the company plans to provide a physical structure (in the form of ATM terminals), to make it easier for users to exchange the cryptocoin for fiat currencies.
Given the fact that Facebook is currently the target of an undergoing antitrust investigation, it’s possible that the social media firm is soliciting help from various tech and financial companies in an attempt to appease antitrust regulators. Despite the involvement of these companies in the cryptocurrency plans, they won’t be a direct part of the blockchain themselves without a bigger investment. To earn a place in the ledger, they will have to pay more than the initial $10 million.
Facebook has also been working with financial authorities across the board to avoid further regulatory scrutiny, and they plan to incorporate anti-fraud systems and identity verification.
It is still unclear how the coin will be used, but many experts believe that Facebook plans to allow users to purchase discounted goods from retailers, and transfer value directly from Facebook to retailers, cutting out banks and credit card companies from the process.
The rumors are heating up, but we’ll have to wait until June 18 when the official announcement should paint a clearer picture of the situation.