Last week Facebook announced Libra, a new cryptocurrency. It's designed for use in transactions and as an easy and cheap way to transfer money.
Expected to launch next year, Libra is what's known as a stablecoin - a digital currency built to avoid the large fluctuations in value that Bitcoin and other cryptocurrencies experience.
And unlike Bitcoin, because the value will remain relatively stable Libra will usable as way to buy things.
While Facebook is the driving force behind Libra, it’s created a foundation that other organizations can join. The foundation will be responsible for managing Libra and Facebook will have no more control than any of the other full members.
So far 27 organizations including Mastercard, Visa and Stripe and Paypal, Uber, Lyft, Spotify, several venture capital firms and 4 nonprofits have joined as founding members of the Libra Foundation.
It is expected there will be more than 100 members by the time Libra launches.
Facebook also announced a new digital wallet called Calibra, which will provide users a way to store and spend Libra. Expect to see many others offering Libra digital wallets.
According to Facebook the main near term market for Libra is the 1.7 billion people around the world who lack access to the banking system.
Other early likely users include people who live in countries with unstable currencies, people who want to move money across borders and people who want to buy digital goods and services (in-game purchases, for example).
But the longer term goal is for Libra to be used for everyday purchases by everyone. This is a goal Bitcoin and other cryptocurrencies have failed at, primarily because their value fluctuates so much.
It will be years before we know if Libra will succeed as common medium of exchange, but the broad organizational support Libra has attracted certainly makes success possible.
In the past we’ve suggested small businesses stay away from cryptocurrencies. We think Libra easily could be different.
Although unlikely to be an important payments option for most small businesses in the developed world anytime soon, it should be easy to add it as a payments option post launch.
So Libra will be worth looking at when it launches.
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