On Tuesday, Facebook formally announced plans for Libra – a cryptocurrency the social network plans to release in 2020.
Like Bitcoin, Ethereum and other cryptocurrencies, Facebook said Libra will be a virtual coin built on blockchain technology – a digital ledger that facilitates and validates transactions.
However, unlike other cryptocurrencies, which can carry volatile swings in value, Libra will behave like a fiat currency in that each Libra will be backed by a reserve of real assets – kind of like how the U.S. dollar was backed by gold until 1971.
But given Facebook’s recent privacy issues, some are voicing concerns about the social network branching into currency.
Rep. Maxine Waters, a California Democrat who chairs the U.S. House Financial Services Committee, called for Libra to halt development since cryptocurrencies still lack regulatory framework.
“This is like starting a bank without having to go through any steps to do it,” Waters told CNBC on Tuesday. “And of course we have some questions about Facebook and some of the ways that it has conducted itself in the past.”
Facebook isn’t the only company with a stake in Libra’s future. Several big-name corporations, like Visa, MasterCard, PayPal, Uber, Lyft and eBay, invested in the venture and are part of the Libra Association, an organization based in Switzerland that will develop and manage the cryptocurrency.
Here to help us understand this newly announced cryptocurrency plan is attorney Zach Smolinski, whose firm Smolinski Rosario Law works with tech companies on a variety of issues, including contracts and intellectual property. Smolinski also hosts and organizes local discussion groups on cryptocurrency and blockchain technology.