Facebook plans to create global financial system based on cryptocurrency

The cryptocurrency, called Libra, will also have to overcome concern that Facebook does not effectively protect the private information of its users.

Business Standard : Facebook unveiled an ambitious plan on Tuesday to create an alternative financial system that relies on a cryptocurrency that the company has been secretly working on for more than a year.

The effort, announced with 27 partners as diverse as Mastercard and Uber, could face immediate skepticism from people who question the usefulness of cryptocurrencies and others who are wary of the power already accumulated by the social media company.

The cryptocurrency, called Libra, will also have to overcome concern that Facebook does not effectively protect the private information of its users — a fundamental task for a bank or anyone handling financial transactions.

But if the project, which Facebook hopes to begin next year with 100 partners, should come together, it would be the most far-reaching attempt by a mainstream company to jump into the world of cryptocurrencies, which is best known for speculative investments through digital tokens like Bitcoin and outside-the-law e-commerce, like buying drugs online.

The company has sky-high hopes that Libra could become the foundation for a new financial system not controlled by today’s power brokers on Wall Street or central banks. “It feels like it is time for a better system,” David Marcus, head of Facebook’s blockchain technology research, said in an interview. “This is something that could be a profound change for the entire world.”

Marcus and other Facebook executives conducted press interviews ahead of the unveiling of their project at the historic San Francisco Mint, a nearly 150-year-old building that once housed one-third of the US gold reserve.

Mark Zuckerberg, Facebook’s chief executive, has discussed his fascination with cryptocurrencies in recent years. And over the last few months, he has promised to offer users better privacy on company-owned services like Facebook, Instagram and WhatsApp.

But improving the privacy of users will make it harder for Facebook to show them ads tailored to their interests. A virtual financial network, if it should work, would be a way for the company to find new revenue if ad sales should drop.

The payment system would also help Facebook and other American companies compete for financial transactions in developing countries, where WeChat, developed by the Chinese company Tencent, already offers a highly profitable payments system built into its popular messaging product.