Facebook Unveils Cryptocurrency Despite Privacy Concerns
As it continues to explore new business models that may work in a world focused on privacy rather than broadly sharing data online, Facebook on Tuesday revealed plans for its own global digital currency, Libra, which aims to allow users to make purchases or send money with close to zero transaction fees.
Facebook said it hopes Libra will make it easier for the estimated 1.7 billion unbanked adults worldwide to access banking services and transfer money electronically. “Just as people can use their phones to message friends anywhere in the world today, with Libra, the same can be done with money — instantly, securely and at a low cost,” Facebook said in a Libra white paper.
Users will be able to make transactions with Libra by 2020, Facebook says, both through a standalone app called Calibra as well as with Facebook’s own family of apps. Unlike bitcoin and some similar offerings, the price of Libra is tied to low-risk assets, which should prevent the speculative behavior and wild price swings plaguing other digital currencies. The currency will be overseen by the Libra Association, a Switzerland-based collective of more than a dozen companies, including Visa, Uber and Mastercard, each of whom have invested at least $10 million in the technology. Users of Libra will pay $1 to use Libra which will sit in a bank account and earn interest which will pay the Libra Association.
Libra arrives at a turbulent time for Facebook. It has made little progress in recovering from the Cambridge Analytica scandal that undermined the public’s trust in the company. It’s expecting as much as a $5 billion fine from the Federal Trade Commission over that and other data breaches. And multiple Democratic presidential candidates have called for big technology companies like Facebook and its rivals to be broken up as monopolies.
A lack of trust in Facebook could be the company’s biggest hurdle in making Libra a success, experts say. “It’s a bold and strategic move that has clear risks as well as opportunities tied to it,” Wedbush Securities Analyst Dan Ives told the Associated Press. “For now, it really comes down to execution, and how comfortable consumers feel around Facebook and cryptocurrency.”
Facebook has promised that Libra users’ financial histories will be kept private and separate from Facebook data. But some experts worry about concentrating all that data in one place regardless. “The whole of point of having an entity like Bitcoin is to exactly avoid one party having all the data on who is paying whom,” says Carsten Sorensen, associate professor at the Department of Management at the London School of Economics. “One possible reading is that this is an attempt from Facebook to try and divert a little bit of all the flack it had for all its invasion of our privacy.”
Others argue that Facebook is wise to relegate oversight of Libra to a consortium. “Facebook is just one of the dozens of members who are going to run it, and so I think that’s how they are addressing the concern,” says Jerry Brito, executive director of the Coin Center, a cryptocurrency research and advocacy non-profit.