This summer, Facebook unveiled their plans to incorporate Libra, a digital cryptocurrency, into the Facebook platform. By the end of 2020, billions of Facebook users will be able to use Libra like any other currency.
In previous Right by the Bay post, I wrote about Facebook’s announcement, highlighting some of the benefits like the use of blockchain technology for transparency, access to capital for developing countries, and little to no cost financial services due to the removal of third-parties. Unfortunately, all the benefits are predicated by the biggest “if” in the technology and regulatory world: can Facebook be trusted?
Congress has had an eye on regulating Facebook, and other technology and social media companies for some time. Congressional members summoned Mark Zuckerberg to Capitol Hill in April 2019, unfortunately showing little understanding of what Facebook actually is.
Recently, Congress sent Zuckerberg another DM, demanding to know what Facebook’s long-term goal is with Libra. In a marathon six-hour testimony on Oct. 23, Zuckerberg answered a literal barrage of questions from the House Services Financial Committee.
It seems that Zuckerberg’s testimony has done little to sway Congress or regulators. In reality, members of Congress probably won’t be swayed to support Libra and viewed this as another opportunity to press Facebook and Zuckerberg on a laundry list of problems.
Facebook has had its public relations machine at full speed recently. The week before his Congressional testimony, Zuckerberg gave a keynote speech on free expression at Georgetown University. He followed that with a press conference about Facebook’s election preparedness a couple of days later.
Facebook’s ideological aspirations have often outweighed the real-world implications of its business. The company has made it a business practice of claiming the moral high ground, yet we all know the evidence is ripe for questioning any business vertical embraced by the Menlo Park giant.
On the one-hand, Facebook’s rise could be called the ultimate free market case study. Facebook was able to build a truly global business platform by syncing the platform’s users with a legacy business practice (advertising).
What started as a social experiment to connect college students has morphed into a digital forum that drives news, memes, and life updates for more than 1.5 billion daily users. As of October 2019, Facebook is estimated to be worth over $531 billion.
That’s more or less double the entire annual budget of the state of California, which happens to be the sixth-largest economy in the world.
We are all aware of the growing list of problems attributed to Facebook: questionable free speech standards, lack of data transparency and the slow internal response to fix it, and misleading analytics, to name a few. Many of the problems around Facebook can be traced to how posts and information is verified. One “fact checker” called it a doomed game of whack-a-mole.
Facebook is essentially merging all these complications into financial services via Libra.
Cryptocurrencies in general are still living a regulatory grey zone. Regulators won’t call it a fiat, or authority-backed currency, but it more than matches several criteria like mediums of exchange, portability, and fungibility. Fungibility, of course, means that a United States dollar is completely exchangeable with another dollar (and not a fungus). While some states promote the industry, federal agencies are pushing back.
The Facebook Libra cryptocurrency is riding the line between a traditional cryptocurrency like Bitcoin, which is completely decentralized and backed by blockchain technology, and a traditional fiat currency.
The Libra is governed by the Libra Association, formerly made up of 28 corporations like Visa, Mastercard, PayPal and more. While Congress may want to have the final say in whether Libra goes live, the project is already stumbling ahead.
Visa, MasterCard, eBay, and Booking Holdings, which0 owns Priceline, Stripe, and PayPal, have all decided to leave the Libra Association. PayPal’s departure is particularly interesting since former president David Marcus left PayPal to run Facebook’s cryptocurrency effort.
What does that mean? It could be that these companies think Libra won’t get the regulatory approval it needs from the federal government. It could also mean these companies have seen the inside workings of Libra and they saw something they didn’t like. It’s safe to say Libra could be as successful as the Miami Dolphins on the football field in the near future.
It seems like Libra was a red line crossed by the company. If you think about, many of the actions you do are recorded, tracked, and analyzed on social media. Statistically, you’re probably doing these things on Facebook or Instagram, whom Facebook owns.
Libra pushes past tracking consumer activity and into a much-more intrusive algorithm. Through Libra, Facebook would have access to where and how users spend their money, not just what they click on or things they like. For many, this may be just one step too far.
Evan Harris is the media relations and outreach manager at the Pacific Research Institute.