Would you trust Facebook with your money?
On Tuesday, Facebook confirmed it would launch a digital global currency similar to Bitcoin, called Libra, aimed at users around the world who don’t have bank accounts.
But there’s another reason Facebook is introducing Libra, said Wedbush analyst Michael Pachter: an opportunity to get some of its more than 2 billion users to shop through the platform.
“Facebook is merely trying to facilitate commercial activity for its customers and the endgame is to offer links to brands they care about,” he said.
The currency is managed by the Libra network, co-founded by several companies in both the payments and tech industries, including Facebook, eBay, Uber, Lyft, PayPal and Visa.
“Moving money around the world should be as easy and cheap as sending a text message,” reads a description on Libra’s website, noting more than 1.7 billion people worldwide don’t have a bank account.
With Facebook’s massive user base, even a small portion of that audience jumping to cryptocurrency gives Libra a boost, said Pachter. “Even one percent is 20 million people. That’s enough,” he said.
Facebook also introduced a digital wallet called Calibra, which is expected to launch on Messenger, WhatsApp and as a standalone app next year.
The wallet will initially allow users to send money to each other before eventually adding new services such as “paying bills with the push of a button, buying a cup of coffee with the scan of a code or riding your local public transit without needing to carry cash or a metro pass,” said Facebook in a statement.
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Screenshots of the app provided by Facebook show balances both in the Libra currency and converted to U.S. dollars. Facebook said the value of Libra will be connected to pegged to a basket of established currencies such as the U.S. dollar, the euro, and the yen.
EASIER TO BUY?
Avivah Litan, distinguished research vice president for Gartner, says Libra could offer a more attractive option for Facebook users who want to shop but don’t want to enter a credit card number.
“Basically, it’s going to be a lot easier to buy things within ads now, as long as you sign up for it,” she said.
In its statement, Facebook said it will use “strong protections” to keep users information and money safe. “We’ll be using all the same verification and anti-fraud processes that banks and credit cards use, and we’ll have automated systems that will proactively monitor activity to detect and prevent fraudulent behavior,” said the company.
However, Libra could magnify privacy issues such as its stewardship over user data that have landed Facebook in hot water. Last month, a co-founder of Facebook wrote a New York Times op-ed calling for a breakup of the tech giant, which CEO Mark Zuckerberg has said would make its effort to resolve privacy issues more difficult.
Meanwhile, Litan said people concerned with Facebook’s response to privacy issues have likely left the platform, while the users who stay and decide to use Libra will give up even more data.
“You’ll end up with bigger privacy issues going forward, frankly,” said Litan.
Another concern, according to Litan: fake ads. Lawmakers have grilled Facebook over fake Russian ads used to sow discord among Americans during the 2016 presidential elections. Litan says Facebook still has work to do to clean up bad ads on its platform. “The cryptocurrency will just magnify that issue,” said Litan. “But now you could lose your money.”
The Associated Press contributed to this report. Follow Brett Molina on Twitter: @brettmolina23.