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Many parties expressed concerns about Facebook's plan to issue virtual currency
On the 18th, the American social media company Facebook said it plans to issue a virtual currency called Libra to provide a payment method for more than 1 billion people around the world who cannot use banking services. On the same day the plan was announced, American and European regulators and the banking industry expressed concern and even worry.
Facebook's coin issuance has received support from more than 20 financial institutions and non-profit organizations, demonstrating the "ambition" of the world's largest social networking company, which is to lead digital currency out of the gray area and integrate into the mainstream.
Facebook plans to officially promote this virtual currency next year . At that time, the Libra Association based in Geneva, Switzerland will perform the duties of a "central bank", and will start "minting coins" and "canceling coins" and maintain the stability of money supply and currency value based on reserves.
Facebook has learned from the lessons of other virtual currencies . In order to avoid being hurt by large fluctuations in currency value and becoming a speculative tool, it has decided to inject real currency into reserves to reflect the value of virtual currencies in circulation , thereby ensuring universality and currency stability.
The Facebook currency prototype uses open source code, making it easy for application developers to embed it into mobile applications, services and business operations. This currency uses blockchain technology to ensure security.
Dante Disparte, director of communications and policy at the Libra Association, said the currency could provide online commerce and financial services to the 1 billion people outside the banking system at minimal cost. "Just as the Internet once provided information to people at minimal cost, we can achieve greater stability."
Payment first
The Libra Association was created by 28 founding members, including MasterCard, Visa, PayPal, Lyft, Uber and Women's World Banking. Facebook has some say in the association, but has set up a separate "wallet" for Libra, called "Calibra."
Tomer Barel, vice president of Calibra business under Facebook, said that the purpose of issuing currency is to complete a mission, that is, to connect everyone at any time and anywhere, including helping them to complete the exchange of value. According to him, compared with the establishment of new virtual currency businesses, "many banks or lending institutions in the countries where Facebook users are located have thresholds."
The Facebook wallet is being built into Facebook Instant Messenger and WhatsApp to make spending Libra as easy as sending a message.
"It's not about trusting Facebook, it's about trusting the founding organizations of the association," Disparte said.
Facebook stated that it would not make profits by issuing coins or through "wallets", and would focus more on "number and scale of users" before monetizing this new system.
Kevin Weil, vice president of product at Calibra, said that Libra will be a strictly managed currency subject to anti-fraud and anti-money laundering laws in its markets. Personal financial information associated with the "wallet" will be strictly separated from social media information and will not be used for targeted advertising.
Safety first
Facebook's coin issuance has undoubtedly excited the payment industry. However, given Facebook's history of failing to protect user information security, the security of the new coin has become a focus of concern, and some regulators hope that Libra will "take a break."
Maxine Waters, chairwoman of the U.S. House Financial Services Committee, asked Facebook to postpone the issuance of electronic currency until Congress and regulators complete their review.
"Facebook is too big and too powerful to allow it to operate a risky cryptocurrency without regulation ," Senator Sherrod Brown, the ranking Democrat on the Senate Banking Committee, said in a statement.
Switzerland's financial regulator said it was in contact with Facebook but did not respond to questions about whether it could grant special permission.
French Finance Minister Bruno Le Maire believes that electronic currency can never replace sovereign currency, and "sovereignty in this regard must be in the hands of the state, not in the hands of private companies that only seek to satisfy their own interests."
The Bank of England is the central bank of the United Kingdom. Governor Mark Carney stressed that Facebook's currency must be tested in practice and must be confirmed that it will not be used for money laundering and financing terrorism.
"Facebook has 2 billion users and is looking for sources of revenue beyond advertising to monetize its huge online community," said Dan Ives, an analyst at Wedbush Securities, adding that now is "not the right time" to issue shares given that regulators are investigating Facebook's data security incident.
In a statement, German MEP Markus Faber called on regulators to be highly vigilant about Facebook currency and called on the European Commission to develop a regulatory framework. (Xinhua)
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