Facebook announced Libra in June after months of speculation and since then, it’s faced nothing but backlash and questions from regulators and the public over its plans. The US Federal Trade Commission slapped the social network with a $5 billion fine in July as part of the settlement of a probe into the company’s privacy practices.
Libra is a cryptocurrency that is being launched by Facebook as an attempt to re-invent Bitcoin — a similar, but older type of currency. The main differences are that Libra will be much faster to confirm transactions, have lower fees and that it will be backed by multiple currencies — allowing it to maintain a stable value, whereas Bitcoin’s value can fluctuate greatly.
There are several critics of the plan, which Facebook has promised to address before launching:
European Commission officials
The US House Financial Services committee, where D-NY Rep. Carolyn Maloney told Facebook that “I don’t think you should launch Libra at all,” The Verge reports
France’s Finance Minister who, according to Bloomberg, said Libra shouldn’t be seen as a replacement for traditional currency
As part of Germany’s blockchain strategy, it will deny Libra from operating in the country
Members from Albania, Australia, Canada, Burkina Faso, the United Kingdom and the US also released a joint statement, setting parameters for Libra to achieve before launching
And to make matters worse, the NY Attorney General released a join statement with her counterparts in Colorado, Florida, Iowa, Nebraska, North Carolina, Ohio, Tennessee and DC. The group is promising to investigate whether Facebook has stiffed competition “to determine whether Facebook’s actions may have endangered consumer data, reduced the quality of consumers’ choices, or increased the price of advertising.”
How private is ‘private’
The point of Libra is to create a currency that will be accessible by the the unbanked — according to The World Bank’s 2017 report, 1.7 billion adults around the world don’t have access to a bank account. Libra hopes to partner with local shops and businesses to allow money money to be added to the wallet app in-person, but will also allow people to transfer money from their bank account or third-party apps.
In a Facebook post, Mark Zuckerberg explained how privacy will be a focus for Libra:
Calibra will be regulated like other payment service providers. Any information you share with Calibra will be kept separate from information you share on Facebook. From the beginning, Calibra will let you send Libra to almost anyone with a smartphone at low to no cost. Over time, we hope to offer more services for people and businesses -- like paying bills with the push of a button, buying coffee with the scan of a code, or riding local public transit without needing to carry cash or a metro pass.
But there’s still a lot of unanswered questions surrounding how data will be accessible to Facebook’s partners — many of whom are in the business of collecting and marketing transaction data.
Another key thing to note is that while these companies will work to govern Libra together, it’s yet to be disclosed who will host the infrastructure for the currency. Facebook hasn’t actually explained whether it would, but this seems most likely if it is planning on launching within Facebook’s own services initially.
Taking money private
France’s Finance Minister, Bruno Le Maire, explained that Libra could become a threat to the stability of the French economy and would have the power to influence the value of the euro, reports Vice News.
Number of bank branches in select developing countries
The main issue countries have is that Libra — should traditional banks follow the same decline as in North America and Europe — might have the capacity to replace central banks, giving countries little options to manage the money flowing in or out of their borders.
There were 31.46 and 21.48 banks per 100,000 people in the United States and Canada, respectively, in 2017, according to The World Bank. But at the same time, there were only 16.9 in Indonesia, 14.72 in India, 9.26 in Ecuador and 5.43 in Kenya (in 2016, the latest year numbers for the country are available). Though the number of bank branches in India is rising, in the rest of the countries the number is either declining or has flatlined.
The risks could be big
It was ironic that Facebook announced Libra at the same time it was being slapped with a $5 billion fine for all its privacy mishaps, including granting smartphone makers access to user data, without the user’s knowledge.
Libra is different than all the other times Facebook has messed up because this time, not just birthdates and personal preferences are up for grabs — people’s hard-earned money is. Facebook has no plans to vet companies providing digital wallets for holding Libra, The Telegraph reports, allowing the possibility of them stealing personal information or even hard-earned money.
To make matters more interesting, hidden deep in the white paper for Libra is a hint that it hopes to conquer more than only money:
An additional goal of the association is to develop and promote an open identity standard. We believe that decentralized and portable digital identity is a prerequisite to financial inclusion and competition.
In theory this could mean a way of decentralizing login tools to provide credentials to websites — instead of using “Login with Facebook” we could use Libra, allowing our credentials to be decentralised and not controlled by any single entity. This would better protect our information, since it wouldn’t be held on a single company’s servers, but the application of logins using this technology is still far away.