Facebook has been secretly building its cryptocurrency project for over a year, and it looks like that time has been well spent. The project has managed to enlist the support of some of the most prominent companies across payments, retail, and technology.
According to the WSJ, Facebook has secured the backing of over a dozen companies for its upcoming Libra cryptocurrency set to be June 18th. These companies include major financial organizations like Visa and Mastercard, and internet darlings like PayPal, Uber, Stripe, and Booking.com. Each will invest around $10 million to fund development of the currency, and will become part of the Libra Association, an independent consortium that will govern the digital coin independently of Facebook.
The cryptocurrency will be a stablecoin - a token designed to have a stable price to prevent discrepancies and complications due to price fluctuations during a payment or negotiation process. Facebook has spoken with financial institutions regarding contributing capital to form a $1 billion basket of multiple international fiat currencies and low-risk securities that will serve as collateral to stabilize the price of the coin. The social media behemoth is working with various countries to pre-approve the rollout of the stablecoin.
Unlike traditional cryptocurrencies like bitcoin, Facebook's crypto will be a centralized, rather than decentralized blockchain network. That means verification is controlled by a select group rather than the public, and the crypto is pegged to a hard asset as a way to mitigate the volatile price swings that have been associated with digital assets.
The anticipated move by Facebook is seen as an endorsement of nascent blockchain, the technology that underpins cryptocurrencies, created about a decade ago with the formation of bitcoin by an individual or group using the name Satoshi Nakamoto.
The payments effort would also come as Wall Street firms and businesses are increasingly experimenting with digital assets. JPMorgan Chase & Co. earlier this year announced a token, called JPM Coin, intended to handle international settlements.
Reports of a Facebook cryptocurrency began circulating in May of 2018, when Cheddar reported the social media giant had begun looking into blockchain nearly a year prior. Facebook then announced David Marcus, vice president of its Messenger app and once-member of Coinbase's board, would lead its blockchain efforts. Prior to Marcus's appointment, Morgan Beller, a member of Facebook's corporate development team, was the only employee studying blockchain.
Since then, Facebook expanded the project and talk of a stablecoin increased with each step the company took into the blockchain world.
