Facebook's Libra Crypto Coin: 5 Things We Know, and 5 We Don't

Facebook Inc. unveiled plans for a new cryptocurrency called Libra this week. When it launches in 2020 or later, it will be a stablecoin–a digital currency that doesn’t fluctuate much because it’s supported by established government-backed currencies and securities.
The world’s largest social media company published a 12-page white paper on Libra and has more than 20 partners for the project. But there are still many questions. After a week of analysis, here’s what Bloomberg reporters and editors know about Libra, along with key unknowns that remain:

Joe Weisenthal, executive editor: digital news at Bloomberg:
For sure: Libra is being touted as a cryptocurrency, so it’s natural to use existing cryptocurrencies like Bitcoin and Ethereum as mental models for what it could be. But it’s probably better to think instead about traditional peer-to-peer payment networks. Whether you’re talking about PayPal, Venmo, Square, WeChat, or even Western Union, all of these networks are in some way layered on top of the traditional financial system in order to ease some type of transaction (e-commerce, check-splitting, remittances). The problem is that these networks aren’t interoperable, and in many cases the fees can be quite high. Like all these other networks, Libra will be layered on top of the existing financial system, since each coin will be backed by traditional money in the bank to support a stable price. Unlike these other networks, however, there is an opportunity to create payments unification on a global scale, and at potentially a much lower cost. And in theory, anyone will one be able to build payment applications on top of Libra. Some might focus on friends splitting the cost of dinner. Others might be focused on remittance payments to developing markets. In the most extremely successful version of Libra, it’s not so much a cryptocurrency, but a global operating system for moving fiat money around.

Unanswered: There are basically two ways to hold a cryptocurrency. One is you can hold your coins with a custodian, or in a custodial wallet. If you buy your Bitcoin on a site like Coinbase, you can just leave it there, and they’ll hold it for safekeeping. The drawback is that you’re trusting Coinbase, which is a regulated entity. If law enforcement comes after you, and says you’re engaged in some illegal activity, Coinbase can freeze you out of your account and your Bitcoin might as well be gone. The other way to hold Bitcoin is in your own, non-custodial wallet. This entails keeping the cryptographic keys that unlock your coins in your own hands. This could be on your phone, on your computer, on a USB drive, or even on a piece of paper that you keep in a safe deposit box. The drawback is if you lose your keys, then your Bitcoin is gone forever. The advantage is that you have the freedom to do whatever you want with them, and it’s very difficult for law enforcement to do anything about it. The question for Libra is whether a user will be able to hold their coins in a truly non-custodial wallet. Can I keep access to the coins on a piece of paper? Or on a thumb drive? And if so, how will Libra stop someone from transferring that piece of paper to a criminal, or someone in a country that has banking sanctions against it? Facebook says its currency will have mechanisms to defeat illegal activity. But if users can take their keys into their own hands, it’s unclear how Libra will prevent them from being given over to a bad actor. And if Facebook doesn’t have a guaranteed way of preventing this, then will regulators really let it get off the ground?