Facebook's New Cryptocurrency Gets Big Backers
June 13 2019 - 6:43PM
Dow Jones News
By AnnaMaria Andriotis, Peter Rudegeair and Liz Hoffman
Facebook Inc. has signed up more than a dozen companies
including Visa Inc., Mastercard Inc., PayPal Holdings Inc. and Uber
Technologies Inc. to back the new cryptocurrency that the
social-media giant plans to unveil next week.
The collection of financial firms and e-commerce companies will
invest around $10 million each in a consortium that will govern the
digital coin, according to people familiar with the matter. The
money would be used to fund the creation of the coin, which will be
pegged to a basket of government-issued currencies to avoid the
wild swings that have dogged other cryptocurrencies, they said.
The Wall Street Journal reported last month that Facebook was
recruiting financial firms and online merchants to help launch the
crypto-based payments system and was seeking to raise around $1
billion for the effort, code-named Project Libra. The secretive
project, in the works for more than a year, revolves around a
digital coin that its users could send to each other and use to
make purchases both on Facebook and across the internet.
Talks with some of the partners are ongoing, and the group's
eventual membership may change, the people added.
A Facebook spokeswoman declined to comment.
It has been a decade since bitcoin was born, yet consumers
hardly use it or the hundreds of other cryptocurrencies to pay for
things. Facebook is betting it can change that with a crypto-based
payments system built around its giant social network and its
billions of users.
It is still not entirely clear, even to some members of the
consortium, how the coin will work or what their roles will be,
people familiar with the project said. Regulatory hurdles in the
U.S. and elsewhere are high.
Some members have expressed concerns that the token could be
used to launder money and finance terrorist organizations, some of
people said, a persistent problem with bitcoin and other
cryptocurrencies.
Facebook won't directly control the coin, nor will the
individual members of the consortium known as the Libra
Association. Some of the members could serve as "nodes" along the
system that verifies transactions and maintains records of them,
creating a brand-new payments network, according to people familiar
with the setup.
Financial-technology firm Stripe Inc., travel-reservation site
Booking.com and Argentina-based e-commerce site MercadoLibre Inc.
have signed on to the project, some of the people said, an
indication of its international ambitions.
Keeping the cryptocurrency network separate from Facebook's
platform gives the social-media giant some cover with users and
regulators should problems arise, a big advantage at a time when it
is under pressure to address privacy shortcomings. Yet Facebook, as
the developer of the underlying technology, could exert
considerable influence over it.
Still, the lure of Facebook's nearly 2.4 billion monthly active
users was too strong for many companies to pass up. Card companies
have long fretted that a technology giant could muscle into their
business, creating a payment option that cuts out card networks.
Participating in Libra allows them to closely monitor Facebook's
payment ambitions while sharing in the upside should the project
gain traction with consumers.
Facebook plans to release a white paper introducing the coin
next week, according to people familiar with its plans, adopting a
format popularized by bitcoin's pseudonymous creator, Satoshi
Nakamoto.
The company has asked consortium members to cosign the paper,
some of the people said.
Write to AnnaMaria Andriotis at annamaria.andriotis@wsj.com,
Peter Rudegeair at Peter.Rudegeair@wsj.com and Liz Hoffman at
liz.hoffman@wsj.com
(END) Dow Jones Newswires
June 13, 2019 18:28 ET (22:28 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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