By The Independent UK
Some of the world’s biggest companies have come together to create their own cryptocurrency that they hope will become a new global currency to rival the US dollar, a decade after the launch of bitcoin.
The Libra currency is backed by 28 companies including the likes of PayPal, Mastercard and Visa and will be launched by Facebook on WhatsApp, Messenger and other apps to allow people to spend and receive money through their phones.
“Technology has made almost everything more accessible, except money,” a video announcing the Libra cryptocurrency states. “1.7 billion are unbanked. That’s 31 per cent of the global population. For those who do have access transfers are slow. A typical cross-border payment takes three to five working days to complete [and] costs are high.”
Libra claims to be able to solve these issues of traditional currencies, while also overcoming the obstacles that have prevented bitcoin and other major cryptocurrencies from achieving mass adoption.
Facebook’s David Marcus, who spearheaded the development of Libra, said the mission of the new cryptocurrency is to create “a simple global currency and financial infrastructure that will empower billions of people.”
A recent report from London-based bitcoin exchange Luno suggests that a new global cryptocurrency could seep into the gaps that both traditional currencies like the US dollar and cryptocurrencies like bitcoin fail to fill. The ‘Future of Money’ survey found that developing markets would be quicker to adopt a currency like Libra than more developed countries.
“Our research shows that in these markets people are more financially savvy because they have to be, which means that they need and understand the benefits the new coins can offer,” said Luno CEO Marcus Swanepoel. “If a cryptocurrency can provide a secure and cheaper means of exchanging value, better than the existing system, it will be used.”
The new cryptocurrency had been widely rumoured since early 2018, when Facebook set up its own blockchain group to explore ways to utilise the technology.
With more than 2 billion users of Facebook-owned apps around the world, many have heralded Libra’s potential to become the world’s first mainstream cryptocurrency, however others have questioned the motives behind the initiative.
Unlike bitcoin, the value of Libra is tied to a collection of currencies in order to prevent price volatility – one of the main reasons people cite when explaining why bitcoin is unsuitable for use as a mainstream currency.
Despite several major retailers accepting bitcoin, the world’s first cryptocurrency has become more commonly used as a store of value or speculative investment.
It is not the first so-called ‘stablecoin’, with a Goldman Sachs-backed startup among several other cryptocurrency projects that have used this method to prevent huge price jumps. But it will be the biggest and most ambitious to date.
“Libra will be a very different beast to bitcoin as it is pegged to a basket of currencies, and as a result it will be a lot less volatile and will be viewed more as a currency as opposed to a store of value,” said Giles Hawkins, a partner at Ashfords Solicitors.