Facebook is planning to launch its own cryptocurrency in early 2020, allowing users to make digital payments in a dozen countries.
The currency, dubbed GlobalCoin, would enable Facebook’s 2.4 billion monthly users to change dollars and other international currencies into its digital coins, which could then be used to make payments or transfer money without needing a bank account.
Mark Zuckerberg, the founder and chief executive of Facebook, last month met the governor of the Bank of England, Mark Carney, to discuss the plans, according to the BBC.
A cryptocurrency is a form of digital asset, created through a canny combination of encryption and peer-to-peer networking.
Bitcoin, the first and biggest cryptocurrency, is part of a decentralised payment network. If you own bitcoin, you control a secret digital key which you can use to prove to anyone on the network that a certain amount of bitcoin is yours.
If you spend that bitcoin, you tell the entire network that you have transferred ownership of it and use the same key to prove that you are telling the truth. Over time, the history of all those transactions becomes a lasting record of who owns what: that record is called the blockchain.
After bitcoin's creation in 2009, a number of other cryptocurrencies sought to replicate its success but taking its free, public code and tweaking it for different purposes.
Some, such as Filecoin, have a very defined goal. It aims to produce a sort of decentralised file storage system: as well as simply telling the network that you have some Filecoins, you can tell the network to store some encrypted data and pay Filecoins to whoever stores it on their computer.
Others are more nebulous. Ethereum, using the Ether token, is now the second-biggest cryptocurrency after bitcoin and essentially a cryptocurrency for making cryptocurrencies. Users can write "smart contracts", which are effectively programs that can be run on the computer of any user of the network if they are paid enough Ether.
Zuckerberg has also discussed the proposal, dubbed Project Libra, with US Treasury officials and is in talks with money transfer firms, including Western Union, to develop cheap, safe ways for people to send and receive money. A report last year said that Facebook is working on a cryptocurrency that will let users transfer money using WhatsApp, its encrypted mobile-messaging app.
In order to try to make the value of Facebook’s digital currency stable, the company is looking to peg its value to a basket of established currencies, including the US dollar, the euro and the Japanese yen.
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Facebook has been long expected to make a move in financial services, having hired the former PayPal president David Marcus to run its messaging app in 2014. Marcus, a board member of crypto exchange Coinbase, runs Facebook’s blockchain initiatives, the technology on which cryptocurrencies run.
Earlier this month the US Senate committee on banking wrote an open letter to Zuckerberg questioning how the currency will work, what consumer protection will be offered and how data will be secured.
In February the JP Morgan became the first major US bank to create its own cryptocurrency, JPM Coin, as a way for its clients to settle payments.