In June 2019, Facebook (now Meta) unveiled its plans for Libra, a digital currency intended to revolutionize online financial transactions. This announcement sent ripples through the financial and technology sectors, sparking discussions about the future of banking, regulation, and the role of social media giants in the global economy. While the original Libra project has evolved, understanding its initial vision is crucial to grasping the ongoing evolution of digital currencies and blockchain technology.
Libra: A Global Currency and Financial Infrastructure
Facebook (Meta) initially envisioned Libra as a “global currency and financial infrastructure.” At its core, Libra was designed as a digital asset built on a new, Facebook-created version of blockchain technology, similar to the technology that powers Bitcoin and other cryptocurrencies. The goal was to create a stable, accessible, and user-friendly digital currency that could facilitate seamless financial transactions for billions of people worldwide.
The name “Libra” itself is rooted in history, derived from the basic Roman measurement of weight. The abbreviation “lb” for pound and the “£” symbol both originate from Libra, highlighting the currency’s intended association with stability and value.
Facebook’s Motivation and Regulatory Challenges
Facebook’s stated goal in launching Libra was to provide financial access to the estimated 1.7 billion people globally who lack a traditional bank account. By offering a digital currency accessible via smartphones, Facebook aimed to empower individuals and communities previously excluded from the formal financial system.
However, this ambitious project faced significant regulatory hurdles and antitrust concerns. Lawmakers and regulators around the world voiced concerns regarding data privacy, security, and the potential for Libra to destabilize national currencies. Some regulators even suggested breaking up Facebook due to its immense market power.
Amidst these concerns, members of the U.S. Senate sent a letter to then CEO Mark Zuckerberg requesting clarification on privacy issues related to the proposed financial expansion.
The Libra Association: A Collaborative Governance Model
To manage and govern Libra, Facebook established the “Libra Association,” a collective of companies intended to operate as an independent, not-for-profit organization based in Switzerland. The Libra Association was designed to serve two primary functions: validating transactions on the Libra blockchain and managing the reserve of assets backing the Libra currency.
The Libra Association Council, comprised of representatives from each member organization, was responsible for making policy and operating decisions. Founding members included tech companies like PayPal, eBay, Spotify, Uber, and Lyft, as well as financial firms and venture capital firms such as Andreessen Horowitz, Thrive Capital, Visa, and Mastercard. These members committed a minimum of $10 million to join the association.
Facebook claimed that while it initiated the Libra Association and the Libra Blockchain, it intended to withdraw from a leadership role once the currency launched in 2020, giving all members equal voting rights.
Acquiring and Utilizing Libra
Initially, details on acquiring Libra were limited. The involvement of traditional payment firms suggested that users could purchase the currency through conventional means. Additionally, Facebook was expected to explore “air drops,” distributing small amounts of Libra for free to encourage adoption and expand the user base, especially among those without bank accounts.
Ultimately, the vision included employers offering salaries, or portions thereof, in Libra.
To facilitate the use of Libra, Facebook planned to launch Calibra, a digital wallet available as a standalone app and integrated into Messenger and WhatsApp. Calibra would enable users to send Libra to anyone with a smartphone. However, the specific countries where Libra would initially launch remained unclear, although Facebook stated that “almost anybody” with a smartphone would be able to download the app.
Beyond peer-to-peer transactions within the Calibra app, Facebook envisioned Libra being used for everyday purchases at various vendors. Early investors in the project, such as Uber and Lyft, hinted at the possibility of users paying for services within their apps using Libra.
Safety and Privacy Considerations
Given Facebook’s track record regarding data privacy, the Libra project raised significant concerns about the security and privacy of financial data. Facebook stated that it would implement technologies to prevent money laundering and fraud, employing similar verification and anti-fraud processes used by banks and credit card companies. The company also pledged to have automated systems proactively monitoring activity to protect against fraudulent behavior.
Furthermore, Facebook promised “live support” to assist users who lost access to their accounts and offered refunds in cases of fraud. The Libra Blockchain was designed to be built on open-source code, allowing the developer and research community to monitor it for design and security flaws. Facebook also planned to implement a “bug bounty” program to incentivize security experts to identify vulnerabilities in the platform.
In an effort to address privacy concerns, Facebook claimed that financial data from Libra transactions would be kept separate from user ad profiles. The blockchain was described as “pseudonymous,” allowing users to hold addresses not linked to their real-life identities. Facebook stated that “Calibra customers’ account information and financial data will not be used to improve ad targeting on the Facebook, Inc family of products.”
The Economic Model
Libra was designed to generate revenue through small charges on each transaction on the blockchain. These charges could be passed on to vendors, who could then absorb the costs themselves or relay them to users.
Evolution Beyond the Original Vision
It’s important to note that the original vision for Libra, as described above, has evolved significantly. Due to regulatory pressures and concerns, the project underwent substantial changes and was eventually rebranded as Diem. Diem ultimately shut down in early 2022. However, the underlying technology and the ambition to create a digital currency accessible to billions continue to inspire innovation in the blockchain and cryptocurrency space. The story of Libra serves as a valuable case study in the complexities of launching a global digital currency and the challenges of navigating regulatory landscapes.
