Facebook crypto chief defends Libra project amid claims the company has too much power

Key Points
  • Facebook's blockchain head, David Marcus, wrote a blog post trying to clear up some common questions about Libra, the cryptocurrency it announced last month.
  • Among the points: Facebook won't control the currency, and it's meant primarily to help unbanked and underbanked people participate in the financial system.
  • If Facebook benefits, it will be because people find it easier to transfer money using Facebook products.
David Marcus
Michael Newberg | CNBC

A little more than two weeks after announcing plans for a cryptocurrency called Libra, Facebook's top executive on the project is reiterating that the company will not be in control of it.

"Facebook will not control the network, the currency, or the reserve backing it," wrote David Marcus, the head of the company's blockchain group, in a blog post on Wednesday. "Facebook will only be one among over a hundred members of the Libra Association by launch. We will not have any special rights or privileges."

Marcus also explained that Facebook's wallet for Libra, called Calibra, will be only one of many wallets, but admitted that Facebook will gain business benefits overall from making it easier for people to use Facebook services to transfer money.

The need to reiterate these points after only two weeks suggests Facebook will have an uphill battle getting people to trust it with something so sensitive as their finances.

It also highlights a fundamental contradiction in the project: While Facebook designed Libra under great secrecy and oversaw its announcement, the company intends to turn control over the cryptocurrency to a body of partners. At launch, those partners included non-profits, credit card companies and payment brokers, among others, but so far major financial institutions have stayed away. The transition of control may not be successful if Facebook can't convince partners there's a reason to join.

It's also not immediately obvious why Facebook undertook the ambitious project of designing an entirely new digital currency, rather than simply creating a payment system that works in conjunction with Facebook products. There are plenty of other examples of tech companies facilitating payments, like Apple Pay and PayPal's Venmo, that let people transfer money electronically without requiring them to convert it to and from a new kind of currency.

Marcus addressed this by saying that Libra's great promise is to help people who are poorly served by the current banking system, particularly those in developing countries.

"With Libra, anyone with a $40 smartphone and connectivity will have the ability to securely safeguard their assets, access the world economy, transact at a much lower cost, and over time access a whole range of financial services," he wrote. "We firmly believe that if Libra is successful, it can be a non-linear step change for billions of people who need it the most."

The novelty and ambition of the idea does not seem to be discouraging investors: Facebook stock is up about 4% since the company announced Libra.

WATCH: Circle CEO says national attention on crypto suggests it's here to stay

Circle CEO Allaire: National attention on crypto suggests it's here to stay
We will see continued growth in non-sovereign money: Circle CEO