What is Facebook trying to achieve by entering the cryptocurrency world?

The release of the white paper means that Facebook has officially become a part of the cryptocurrency world. At 17:00 on June 18th, Beijing time, Facebook's cryptocurrency website calibra.com was officially launched, and the name Libra also surfaced. With nearly 2.4 billion monthly active users, Facebook does have the capital to enter the game, and the demand for new payment methods also makes the birth of Libra inevitable. However, as the old saying goes, the cryptocurrency world is risky and investment needs to be cautious. Even a behemoth like Facebook may collapse.

Libra, named "Libra", is led by Facebook executive David Marcus, who was in charge of Facebook Messenger. Before joining Facebook, he was the president of PayPal. "Libra's mission is to build a simple, borderless currency and financial infrastructure that serves billions of people." Facebook summarized the cryptocurrency Libra in its white paper. According to Facebook's arrangement, the Libra cryptocurrency and the underlying blockchain network will be officially launched in 2020, and the test network will be released in the next few weeks.

Regarding the reason for launching Libra, in response to an interview with a Beijing Business Daily reporter, Alexandru Voica, a relevant person in charge of Facebook, said, "The emergence of the Internet and mobile broadband has enabled billions of people around the world to access knowledge and information, high-fidelity communications, and a variety of low-cost, more convenient services. This connectivity enables more people to enter the financial ecosystem, thereby promoting economic empowerment. That's why we launched Libra, a global cryptocurrency, a new and more inclusive financial infrastructure driven by blockchain technology that people can use to meet their daily needs."

Regarding the volatility of cryptocurrencies, the above-mentioned person in charge continued to explain that Libra is a low-volatility asset that will be linked to certain assets, such as bank deposits and government securities from stable and reputable central banks; and Libra reserve assets will be held by a geographically distributed network of custodians with investment-grade credit ratings to ensure the security and decentralization of assets. Alexandru Voica gave an example that any Libra holder can sell it for local legal tender at a narrow exchange rate below the reserve value, such as exchanging one currency for another when traveling.

In order to promote the commercial application of Libra, Facebook has formed a non-profit Libra Association, and 27 service organizations such as Visa, Mastercard, Uber, PayPal and eBay have joined the association. According to a previous report by the Wall Street Journal, Facebook will charge each member $10 million so that members can manage their own nodes, access and view the network. Alexandru Voica also explained that the Libra reserve will be invested in low-risk assets and will generate a small amount of interest over time. The interest will be used to pay the costs of the system and the association, ensuring low transaction fees, and the rules for allocating interest will be determined and supervised by the association.

The market seems to be very optimistic about the prospects of Libra. With the entry of giants, the cryptocurrency circle is naturally excited. Starting yesterday, Bitcoin futures CME officially returned to the $9,000 mark, setting a new high in 13 months.

Merrill Lynch analysts said in a report that by introducing digital currency, Facebook will be able to save a lot of unnecessary steps and expand its e-commerce business. Digital currency will become an important tool for its e-commerce business. Royal Bank of Canada Capital Markets analysts also said that the launch of digital currency will be the most important move in Facebook's history and will create new business and revenue sources for the company.

However, this does not mean that there are no risks. In order to ensure that Libra will not become a money laundering tool like other digital currencies, Facebook must closely track the source and destination of the currency, and the user's consumption information and other personal privacy will be closely monitored. Whether Facebook, which has been plagued by privacy scandals, can achieve a balance is another big question mark.

Beijing Business Daily reporter Tao Feng and Tang Yitian