Facebook has announced a digital currency called Libra that will allow its billions of users to make financial transactions across the globe, in a move that could potentially shake up the world’s banking system, The Guardian reports.
Libra is being touted as a means to connect people who do not have access to traditional banking platforms. With close to 2.4 billion people using Facebook each month, Libra could be a financial game changer, but will face close scrutiny as Facebook continues to reel from a series of privacy scandals.
It could also be a welcome lift to Facebook’s profits: analysts are suggesting Libra could be a huge moneymaker for Facebook, arriving as its growth slows.
Technology to make transactions with Libra will be available as a standalone app – as well as on WhatsApp and Facebook Messenger platforms – as early as 2020. It will allow consumers to send money to each other as well as potentially pay for goods and services using the Facebook-backed digital currency instead of their local currency.
But with the company in the crosshairs over multiple privacy violations, the move is already attracting scrutiny from financial regulators and privacy advocates across the world. Facebook is currently facing a potential $5bn (£4bn) fine from the US Federal Trade Commission (FTC), which opened an investigation in response to the Cambridge Analytica revelations first reported by the Guardian and Observer.
US and UK officials have expressed concern about Facebook’s move into the financial sector. In May, members of the US Senate committee on banking, housing, and urban affairs wrote to Mark Zuckerberg, the Facebook CEO, asking him to answer questions on privacy concerns and financial regulation.
“It is important to understand how large social platforms make data available that can be used in ways that have big implications for consumers’ financial lives,” the letter said. “It is also important to understand how large social platforms use financial data to profile and target consumers.”
Facebook executives claim the Libra system will help the many millions of people without bank accounts but with access to mobile phones to enter the banking world and to more seamlessly send money.