“In Zuck We Trust”
On June 18, Facebook revealed their plan to invent a financial system that depends solely on a cryptocurrency called Libra, that Facebook has designed itself. This is system is going in with a solid backing of 27 including MasterCard, Spotify, eBay, Paypal and Uber, according to The New York Times.
However, public concern regarding the previous misuse of cryptocurrencies like Bitcoin will be a hurdle that Mark Zuckerberg and Co. will need to overcome to make their new financial platform a success. Facebook will have to take caution not to disseminate private information, which it has been guilty of in the past, especially when handling transactions. Further, Libra needs to keep its distance from illegal e-commerce and black-market activities, which Bitcoin was often used for in the past (including but not limited to the selling and purchasing of drugs via the cryptocurrency).
The company is trying to free itself from the clutches of central banks and the titans of Wall Street and if Facebook is successful, this will become one of the largest paradigm shifts to hit the financial world.
Zuckerberg, according to The New York Times, has discussed his interest in cryptocurrency and claims that services owned by Facebook (Instagram and WhatsApp) as well as Facebook itself will see data protection and privacy improvements. However, at the cost of greater security comes a restriction for Facebook’s advertising team, who uses personal information to curate ad content towards its users. Alternatively, according to The New York Times’ analysis, the success of Libra could generate financial gain for Facebook, compensating for a dip in advertising sales.
It seems fitting that Libra would emerge in the midst of the American and Chinese trade war, where China has exerted its independence through its profitable and nationalised communications system “WeChat”. With the launch of Libra on a global scale, Zuckerberg seems like WeChat’s biggest rival.
Facebook is taking measures to release the Libra project in a way that appeals to people that are reluctant to dabble in the new cryptocurrency. Apparently, Libra will be supported by government currencies including the dollar, unlike Bitcoin, which has seen substantial fluctuations in value. If Libra is backed by global currencies, it’ll see as much fluctuation as the global currencies that bolster it. Facebook is also trying to pass direct management of Libra onto a non-profit entity based in Switzerland, called the Libra Association, which is supposed to have greater autonomy over the cryptocurrency than Facebook.
The currency will operate in ways similar to Bitcoin, with digital wallets based on blockchain technology. Blockchain will essentially mobilise the cryptocurrency to move to other parties, with potentially low transaction fees. Blockchains are shared databases that do not require central operators, unlike real-world banks. Without a central operator, several companies can monitor Libra. Customers can use Libra for services, good and businesses that have also embraced the cryptocurrency with new platforms that can convert Libra into existing global currencies, which means that money can also be transferred into real-life bank accounts, according to research papers released by Facebook.
Libra will be offered to the millions of uses that hold WhatsApp and Facebook accounts. If successful enough, the cryptocurrency could also develop the autonomy to provide loans and investments for businesses and start-ups.
Scrutiny on The Libra Project
The Libra project will face critical inspection from the Federal Trade Commission in Washington, which is on the verge of imposing a hefty fine on Facebook (potentially of billions of dollars) for breaching privacy.
The US and other nations could intervene to prevent the release of Libra before its release if the risk of black-market and elicit digital crimes, that have been affiliated with Bitcoin in the past, is still present. The public may also be concerned with the amount of power and authority Facebook already wields, fearing that the company should be broken down into separate entities to prevent it from gaining too much power.
However, in spite of all public and federal Facebook’s magnitude is a huge advantage as compared to rivalling cryptocurrencies and financial systems. Time will tell whether the immensity of the Facebook corporation will make users reject Libra altogether out of Facebook’s previous misdemeanours with privacy and power, or if Facebook will rule the financial world as well as the socio-digital world.