Facebook has announced a cryptocurrency called Libra that will roll out for use in 2020 and allow the platform’s billions of users globally to make financial transactions online.

This new cryptocurrency may change the landscape of banking and is already the subject of scrutiny, as Facebook faces increasing calls for regulations and policy.

What is Libra?

Facebook says Libra is a “global cryptocurrency and financial infrastructure”, meaning it is a digital asset built by Facebook and powered by a new Facebook-created version of blockchain.

Why is it called Libra?

The name Libra comes from the basic Roman measurement of weight. The abbreviation lb for pound is derived from that, and the £ symbol originally comes from an ornate L in Libra.

Why is Facebook creating a cryptocurrency?

Facebook claims it wants to reach the 1.7 billion people who do not have access to a bank account.

The company is likely to run into regulatory hurdles and antitrust concerns, especially at a time when many regulators want to break up Facebook, but no specific legislation has been put forth ahead of the launch. Amidst rumors of Facebook’s new crypto, members of the US Senate wrote to CEO Mark Zuckerberg asking for clarification on privacy concerns.

Who is in charge of Libra?

The cryptocurrency will be serviced by a group of companies called the “Libra Association”. It functions as what is known as a “stablecoin”, pegged to existing assets like the dollar or euro, in order to make it less subject to the volatility that many cryptocurrencies experience.

The Libra Association is described by Facebook as an independent, not-for-profit organization based in Switzerland. It has two main functions: to validate transactions on the Libra blockchain and to manage the reserve Libra is tied to and allocate funds to social causes.

Within the Libra Association will be a governing body called the Libra Association Council, comprised of a representative of each member of the association, which will vote on policy and operating decisions.

Facebook claims that although it created the Libra Association and the its Blockchain, once the currency is launched in 2020 the company won’t be as leader anymore and all members of the association will have equal votes in governance of Libra.

The companies who contributed a minimum of $10m(£8m) to be listed as founding members of the Libra Association include tech companies such as PayPal, Ebay, Spotify, Uber and Lyft, as well as financial and venture capital firms such as Andreessen Horowitz, Thrive Capital, Visa and Mastercard.

How can I use it?

When the cryptocurrency launches, users can download Calibra which is a digital wallet, and by that they can send it to anyone with a smartphone. It will be available in Messenger, WhatsApp, and as a standalone app.

It is not clear which countries will launch it first, though Facebook said “almost anybody” with a smartphone will be able to download the app.

What can you buy with it?

Facebook will launch Calibra to allow users to send money to and from each other.

Apart from transactions on the app itself, Facebook wants to facilitate the use of Libra at various vendors for daily transactions.

How much safe is it?

There are many privacy concerns regarding a financial app run by Facebook. The company said it will use technologies to prevent money laundering and fraud.

“We will be using all the same verification and anti-fraud processes that banks and credit cards use, and we’ll have automated systems that will proactively monitor activity to protect and prevent fraudulent behavior,” Facebook said.

It also claims it will have “live support” to protect users who lose access to accounts and, if a user loses money through fraud, Facebook has offered refunds.

Facebook’s Libra Blockchain will be built on open source code that allows the developer and research community to monitor it for design and security flaws, and the company will implement a “bug bounty” program to incentivise security experts to point out vulnerabilities in the platform.