The WSJ started the ball rolling this morning and then Techcrunch and Digital Transactions articles added more. Digital Transactions was somewhat bemused, indicating Mastercard characterizes Libra as “speculation”:
“At least four payments companies are set to participate in a consortium formed by Facebook Inc. to launch a cryptocurrency next year aimed at commerce rather than exchange trading, according to a report Friday in The Wall Street Journal. Facebook is expected to officially announce the initiative next week.
The consortium, called the Libra Association, will manage what will be called the Libra coin, the Journal reported, quoting sources familiar with the initiative. Mastercard Inc., PayPal Holdings Inc., Stripe Inc., and Visa Inc. are among more than a dozen companies putting up $10 million each to fund the association, according to the story. One other participant identified by the report is ride-share pioneer Uber Technologies Inc., which relies heavily on mobile payments funded by passengers’ cards on file.
Contacted by Digital Transactions News, a spokesperson for Mastercard said the network would not comment on “speculation.” PayPal, Stripe, and Visa did not immediately respond to requests for comment. Facebook will not comment in advance of its expected announcement. Details remain sketchy, but at least some of the participating companies could serve as so-called nodes on the new network, according to the Journal report. Nodes verify and record transactions.”
Techcrunch was more favorable and added a few additional facts:
“Facebook is finally ready to reveal details about its cryptocurrency code named Libra. It’s currently scheduled for a June 18th release of a white paper explaining its cryptocurrency’s basics, according to a source who says multiple investors briefed on the project by Facebook were told that date.
Meanwhile, the company’s Head of Financial Services & Payment Partnerships for Northern Europe Laura McCracken told German magazine WirtschaftsWoche‘s Sebastian Kirsch that the white paper would debut June 18th, and that the cryptocurrency would indeed be pegged to a basket of currencies rather than a single one like the US dollar to prevent price fluctuations. Kirsch tells me “I met Laura at Money2020 Europe in Amsterdam on Tuesday” after she watched fellow Facebook payments exec Paulette Rowe’s talk. “She told me that she wasn’t involved in what David Marcus’ [Facebook Blockchain] team was doing. But that I’d have to wait until June 18th when a whitepaper was supposed to be published to get more details.” She told him she thought the date was already a publicly known fact, which it wasn’t.
Then, yesterday TechCrunch received a request for a June 18th news embargo from one of the communications managers for Facebook’s blockchain team. The Information’s Alex Heath and Jon Victoralso reported yesterday that Facebook’s cryptocurrency project would launch later this month.
Facebook declined to comment on any news regarding its cryptocurrency project. There is always a chance that the announcement date could fluctuate if snafus with partners or governments arise. One source says Facebook is targeting a 2020 formal launch of the cryptocurrency
The debut of Libra or whatever Facebook decides to call it could unlock a new era of commerce and payments for the social network. It could be used to offer low or no-fee payments between friends or remittance of earnings to familys from migrant workers abroad who are often gouged by money transfer services.
Sidestepping credit card transaction fees could also allow Facebook’s cryptocurrency to offer a cheaper way to pay merchants for traditional ecommerce, or facilitate microtransactions for a la carte news articles or tipping of content creators. And a better understanding of who buys what or which brands or popular could aid Facebook in ad measurement, ranking, and targeting to amplify its core business.”
Let’s start by identifying three positive attributes of Libra that were discussed. First is the fact that Libra is a digital asset pegged to a basket of currencies – stability is a good thing. Second is the fact it will be managed by a consortium. If we assume that consortium will be made up of participants that can control the infrastructure and represent different countries and use cases, then it would be a step in the right direction.
Lastly, and not actually specifically stated, is that this appears to be a digital currency that will have acceptance limited to consortium members. This would in essence be similar to JPMorgan Coin and others that are most closely associated with a closed loop payment implementation. This would play a key role in defining which regulations the coin falls under and would somewhat simplify the regulatory process.
We still wonder why it was decided to go crypto and why Facebook organized it, but according to the WSJ article, even the consortium members don’t know what Libra is – which isn’t very comforting. Here are eight simple questions that we hope will be answered in the White Paper due to be released June 18th:
- How will KYC and AML be performed?
- How will consumers acquire these digital assets and through which exchanges?
- Will each Libra consortium partner be acting as an exchange for consumers that wish to buy and sell these digital assets?
- Exchanges are the single largest source of criminal activity for all digital currencies, how will Libra exchanges be secured and managed?
- What blockchain implementation is Libra based on, how is it managed operationally and how will deployment of enhancements be managed?
- How will Libra manage alignment with regulatory bodies in each country? Will the Libra consortium follow a model similar to the Sovrin Foundation with representatives from multiple countries and use cases?
- What’s the revenue model and who participates in that revenue?
- Have consortium members carefully considered their liability in this scheme?
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group