Social media giant Facebook has released details of its cryptocurrency global payments project, including the role to be played by its Geneva-based foundation, the Libra Association.
The non-profit entity was set up in Switzerland last month because the country “has a history of global neutrality and openness to blockchain technology, and the association strives to be a neutral, international institution, hence the choice to be registered there,” read a statementexternal link.
Switzerland, the self-styled “Crypto Nation”, is home to a growing number of blockchain companies and non-profit foundations related to cryptocurrencies.
"Switzerland and specifically Geneva ensures that the association is plugged in to the international community and international financial system," Libra Association head of policy and communications, Dante Disparte, told swissinfo.ch. "One of the important priorities for this project is financial inclusion, so proximity to civil society and international organisations helps us stay true to that mission."
The role of the Libra Associationexternal link is to mint and control supply of the new cryptocurrency called Libra. It will manage the reserve of government-issued currencies designed to keep the price of Libra stable, develop the Libra Blockchain on which it runs and play an important role in validating transactions among users on the digital payments network.
The foundation also has a mission to promote and develop the network over time – for example, by issuing grants to projects that support “financial inclusion efforts worldwide”.
The body will initially comprise of 28 “Founding Members”, its website statesexternal link. These range from entities as diverse as Visa, eBay, Spotify, Uber and Vodafone but also include venture capitalists, blockchain companies and NGOs such as Mercy Corps.
‘Digital cash’ system
While there are other digital payment systems already in use, including Apple Pay and the Swiss Twint app, Libra runs on blockchain as a form of “digital cash”. This allows multiple parties to authenticate transactions and balance the books without the need for third parties such as banks.
It is designed to be faster and simpler to use than the current financial system, where payments can take days and transactions attract charges from intermediaries that channel them through the system.
There is currently no set date for when it will be operational, but some media have reported it could be up and running as early as next year. Facebook has set up a subsidiary called Calibra that will manage the technical side of making payments, initially on Facebook Whatsapp and Messenger platforms - which have more than 2.5 billion active users. Calibra also plans to offer a future range of financial products and services on the platform.
Critics complain that Facebook is attempting to dominate blockchain and cryptocurrencies in the same way as it has on the internet. Unlike bitcoin, which allows anyone to mint the cryptocurrency and validate transactions, the Libra token comes with centralised controls – it chooses a limited number of validators while the Libra Association controls supply of the cryptocurrency.
The Libra Association says: “An important objective of the Libra Association is to move toward increasing decentralization over time. This decentralization ensures that there are low barriers to entry for both building on and using the network and improves the Libra ecosystem’s resilience over the long term.”
Within the next five years, “the association will develop a path toward permissionless governance and consensus”, the foundation states. “In so doing [it] will gradually reduce the reliance on the Founding Members. In the same spirit, the association aspires to minimize the reliance on itself as the administrator of the Libra Reserve.”