The virtual currency “Libra" is Facebook's latest brainchild, and is scheduled for launch in 2020.
The new currency will facilitate users' financial transactions on the social network, while also potentially serving as a financial service for the millions of unbanked individuals across the world.
Facebook aims to provide a viable alternative for those who lack access to banking services, particularly in developing countries and among women, and will target the approximately 70 percent of small businesses in emerging markets without access to credit.
The ubiquity of smartphones and social network penetration around the world can now allow many more people to access digital financial services.
Facebook pointed to these key points in the White Paper released in June, asserting the company's apparent belief in the importance of access to cheap capital for the unbanked but connected population of the world, and the potential commercial opportunities this would provide.
In addition, the company is positioning itself in the international money transfer market with the introduction of a “digital wallet" to complement Libra.
Calibra will offer users the opportunity to save, send, and spend Libra via a standalone application or through Facebook Messenger and Whatsapp, in a move aimed at tapping into the USD25 billion money transfer industry.
Libra will be managed and overseen by a collective of companies dubbed the "Libra Association." The Libra Association is described by Facebook as an independent, non-profit organization based in Switzerland.
The organization has two functions, the first of which is to verify the transactions on the Libra blockchain, and the second to fund any social responsibility projects using reserves built up in Libra.
Companies contributing a minimum of USD10 million are the founding members of the Libra Association. These founding members include technology companies such as PayPal, Ebay, Spotify, Uber, and Lyft, and investment and finance firms such as Andreessen Horowitz, Thrive Capital, Visa, and Mastercard.
International credit rating agency Fitch Ratings stated that Facebook's cryptocurrency Libra could provide price stability and serve as a useful trading tool:
"A potential advantage of Libra versus other cryptocurrencies is its full backing by a reserve basket of fiat currency assets managed in a reserve fund implemented like a currency board. The size of the reserve fund will be a function of transactional demands, not an arbitrary supply limit or other algorithm as in other cryptocurrency implementations."
The Guardian noted that Facebook, which has 2.4 billion users, has the potential to make a difference in the global banking system.
However, as with many cryptocurrencies, there are concerns about privacy for users of Libra. With mounting controversy surrounding Facebook's decisions in recent years and a number of data breaches concerning users and privacy watchdogs, this issue could emerge a defining factor in Libra's success.