Discussions with regulators
The Financial Times revealed in early June that Facebook had begun talks with the Commodity and Futures Trading Commission (CFTC), the US agency responsible for regulating exchanges, including futures and derivatives in the United States. Christophe Giancarlo, its president, said he was “only at the first exchanges” with the social network but said that “it was brilliant”, following a demo. “We feel a solid interest in better understanding of this product. However, we can only act following an official referral, and nothing has been presented to us,” he added. According to several American media reports, Mark Zuckerberg has already consulted the Treasury and the SEC, the US financial policeman, to determine the nature of the GlobalCoin. The two institutions have not confirmed or denied this information. It should also be noted that the boss of the US giant met with the governor of the English central bank, Mark Carney.
What is the libra?
The libra will be a crypto-currency indexed to a basket of stable fiat currencies (not yet defined), probably the dollar, euro, pound sterling, and yuan. It will, therefore, be a stablecoin, i.e., a stable cryptocurrency. For example, if the price of bitcoin is $10,000 and you exchange 1 bitcoin for libra, you will have 10,000 libra units. If the price of Bitcoin drops to $5,000, you will still have $10,000 in libra. In addition to being stable, Facebook’s crypto will be instantly exchanged since it will not need to go through the banking network.
What is the purpose of the libra?
The libra will be able to be exchanged between Internet users as it is now possible to make money transfers peer-to-peer via applications such as Lydia, Pumpkin, or PayPal. It will be possible to exchange libras via an app created by Facebook: Calibra. It is a wallet that will allow you to buy, sell, and store Facebook’s crypto. Finally, it will also be via the Facebook, WhatsApp, and Messenger platforms. In total, more than 2.7 billion people use at least one platform of the group’s ecosystem (Facebook, Instagram, Messenger, and WhatsApp) each month. The bookstore will also be used to pay for purchases from partner merchants. At the moment, we can count Uber, Booking, Spotify, eBay, Lyft, and Iliad, among others. As far as transaction costs are concerned, the chances are that they will be low.
The Libra blockchain
Libra cryptocurrency is based on a “permission” blockchain, which means that access to the protocol must be validated, unlike Bitcoin, a public blockchain, open to all. Facebook wants the blockchain to be without permission in the long run, but that this is not possible because “there is currently no proven solution that can offer the scale, stability, and security necessary to support billions of people and transactions around the world within a network without permission,” it is written in the presentation document.
