Image source: Wall Street Journal
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According to people familiar with the matter, these financial and e-commerce companies, venture capitalists and telecommunications companies will each invest $10 million in a consortium for managing the digital currency Libra . They said the money will be used to fund the creation of this cryptocurrency. Libra will be linked to a basket of government-issued fiat currencies to avoid violent price fluctuations like other cryptocurrencies.
The Wall Street Journal reported last month that Facebook is recruiting supporters to help launch the cryptocurrency-based payment system and seek to raise up to $1 billion in funding.
In more than a year of preparation, this mysterious project revolves around a digital currency where users can send the coin to each other and use it to shop on Facebook and the Internet.
Informed sources added that negotiations with a number of partners are ongoing and the final membership of the Libra consortium may change.
A Facebook spokesperson declined to comment.
Bitcoin has been around for ten years, but consumers rarely use it (or hundreds of other cryptocurrencies) to make payments. Facebook is betting on this area, and it can change this situation around its huge social network and its cryptocurrency-based payment system built by billions of users.
People familiar with the matter said that it is unclear how Facebook's currency will be used, and what role they will play, even some members of the consortium do not know. In addition, regulatory barriers are high in the United States and elsewhere. Some members said they are concerned that Facebook's currency may be used to launder money and fund terrorist organizations, and some say it is a long-term issue with Bitcoin and other cryptocurrencies.
Facebook does not directly control this digital currency, and individual members of the Libra consortium will not. According to people familiar with the matter, some of them can act as “nodes” for the entire system, verify transactions and maintain transaction records, thus creating a new payment network.
Some people familiar with the matter said that the financial technology company Stripe Inc., the travel booking website Booking.com and the Argentine-based e-commerce site MercadoLibre Inc. have signed the project, which shows that Facebook wants Libra's international ambitions.
Separating the cryptocurrency network from Facebook's platform allows the social networking giant to get some cover from users and regulators when problems arise, which is a huge advantage when Facebook faces pressure to address privacy flaws. However, as a developer of Libra's underlying technology, Facebook can exert a considerable influence on this digital currency.
Despite this, Facebook's nearly 2.4 billion active users per month are too attractive and many companies cannot refuse. For a long time, credit card companies have been worried that a technology giant might force them into their business, creating a payment option that cuts off the credit card network. Participating in the Libra project will allow Visa and MasterCard to keep a close eye on Facebook's payment ambitions while sharing the benefits of the project's appeal to consumers.
According to people familiar with the matter, Facebook plans to release a white paper introducing Libra on June 18, using a format promoted by Bitcoin maker Satoshi Nakamoto.
Some people familiar with the matter said that Facebook has asked the consortium members to sign the white paper.