Facebook announced a big plan on Tuesday: Next year, it's launching a cryptocurrency called Libra. The idea has been hinted at for some time, and it reportedly originated in a Dominican Republic oceanside brainstorm.

Here's Facebook's summary in two sentences: "Libra is a global, digitally native, reserve-backed cryptocurrency built on the foundation of blockchain technology. People will be able to send, receive, spend, and secure their money, enabling a more inclusive global financial system."

Unpack that, add some other news from the past 24 hours about Facebook's planned offering, and I think there are at least nine reasons why Libra falls into the category of "so crazy, it just might work."

  1. It just might work -- because of Facebook. Facebook has 2.3 billion users around the world, all of whom will face inducements to engage with -- and trust -- Libra. The sheer scale of the potential user base means that Libra should immediately become the most likely Western digital currency to eventually be broadly accepted.

  2. It just might work -- in spite of Facebook. Public trust in Facebook has nosedived over the past 18 months. That's probably why the company announced that the Libra will be overseen indirectly -- by a subsidiary called Calibra, rather than Facebook itself -- and that Facebook will control only one of the board seats overseeing it.

  3. It's backed by real assets. Libra is reportedly going to be backed by real assets: a "basket of currencies" that should remove some of cryptocurrency's usual volatility. Last month, The Wall Street Journal noted that Facebook was working on a "'stablecoin,' backed by government currencies," and this seems to be a key point.

  4. It has big supporters. Out of the gate, Facebook announced financial partners like Mastercard, Visa, PayPal, Spotify, Andreessen Horowitz, and Uber. I find it surprising that Facebook is positioning Libra as its own offering, rather than as a joint project with a coterie of fellow corporations.

  5. It's designed to help the unbanked. One of Libra's first targets will almost certainly be the millions of people who live in places with less-than-stable banking systems. In short, if your national government can't provide a stable currency, Facebook will.

  6. It's also big for immigrants. There are millions of immigrants around the world who send money to family in their home countries each month. The transaction costs on those transfers add up to $25 billion a year, according to Facebook.

  7. Users could get paid. I don't see this idea in the documents Facebook revealed Tuesday, but there's been speculation that consumers could earn Facebook's cybercoin by doing things like engaging with Facebook ads.

  8. Merchants will get paid. Talk about cyclical: Facebook is also considering letting users "click ads to buy a product and pay with Facebook tokens, which the retailer could then recycle to pay for more ads," as The Wall Street Journal reported recently.

  9. There's a good chance your business will have to accept it. If this starts to gain any kind of critical mass, businesses of all sizes will start to accept it for payment. Just as vendors are basically forced to accept credit cards now, you might not have any choice but to accept Libra.

There are, of course, big privacy issues. It's not just a matter of trusting Facebook to keep your information private and secure. It's a matter of trusting any giant, public company that answers first to shareholders when it comes to currency.

Still, if Libra works, Facebook could transcend the corporate world and take over functions that only governments could previously hope to handle. Against all odds, cryptocurrency might one day be the single thing for which Facebook is best remembered.

Published on: Jun 19, 2019
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