Opinion

Can Facebook Libra Project be Trusted to Run a Banking System?

Facebook libra - cfamedia

A 2018 report released by the World Bank, showed that about 1.7 billion people are unbanked, globally.

With this large figure, the largest social network platform, Facebook, plans to commence the minting, of its own currency, from 2020.

According to Facebook, there would be instant transactions and fees would, probably, not be in place.

The social network is, planning to integrate that large part of the world’s population, into the universal global system.

Around this conversation is Facebook’s cryptocurrency, Libra, which, unlike the bitcoin, will work with non-digital currencies, especially, the dollar.

These operations would be executed, by Facebook and some companies, on its list, however, Mastercard, PayPal and some others, had pulled out of the race.

Over a week ago, Mark Zuckerberg, CEO, Facebook, had appeared before the United States House Financial Services Committee, where he got quizzed on trust issues, concerning how safe people’s money will be, in the hands of the social network platform, turning digital bank.

“You’ve proven that we cannot trust you with our emails, with our phone numbers, so, why should we trust you with our hard-earned dollars?”, asked Ayanna Pressley, a Representative, from Massachusetts.

On the backdrop of the Cambridge Analytica scandal and other meddling activities, Facebook has soiled its hands, with the question in the minds of many of its critics and some skeptics, who doubt, if the social network platform can operate, in the financial sector, without its users, raising an eyebrow.

Thoughts Of People

Libra may just be Facebook’s final hope, to redeem its image, as the backlash it got, from recent scandals, would not disappear into thin air, anytime soon.

Kevin Werbach, in The Times, noted that, Facebook, over the years, has built a dynasty that balances an appeal, of unparalleled social connection, while, simultaneously, having the tendency, to execute data mining.

Facebook needs to restore this initial balance, by bringing in something new.

“If Facebook can establish Libra, as a trusted way, for users to make their transactions, it will go a long way, to rebuilding trust, in Facebook itself”, noted Werbach.

“The benefit of digital currency is that, it can be decentralized and encrypted and so, less prone to privacy violations than Facebook’s core advertising business that depends, on harvesting user data.”, Werbach added.

Kara Swisher, a tech journalist, shared her thoughts on the possibilities, of Facebook, ‘undoing’ it’s scandalous past.

She explained that the social network company, promised not to link, to its social data, the financial information it would generate.

Facebook Libra was created, as a separate and independent platform, from the social network.

According to Swisher, Facebook will link its cryptocurrency to the dollar and the likes, put it, into a position of a trusted and stable medium of exchange.

“I wouldn’t trust Facebook to hold my house keys and yet, I think it’s Libra cryptocurrency effort is, exactly, the right move, for it to make”, She added

Can It Be Trusted?

Matthew Stoller, author of “Goliath: The 100-Year War Between Monopoly Power and Democracy”, has suggested that welcoming Facebook Libra is, much of a bad idea and like an ill wind that blows nobody good.

He highlighted some of his thoughts, as summarised below:

Privacy

Facebook has, particularly, not been clear, on data protection and privacy, around Libra.

Since the turn of the Cambridge Analytica scandal, the social network platform has found itself amidst controversies.

“Imagine Facebook’s subsidiary, Calibra knowing your account balance and your spending and offering to sell a retailer, an algorithm that will maximize the price, for what you can afford to pay for a product.

You cannot imagine a platform wielding so much power on the financial visibility of their customers and various businesses”, Stroller stated, in describing a scenario.

Financial Risk

Unlike the ups and downs that have riddled bitcoin, over the past few months, Libra promises to hold stability in its value.

The reason for this promise of stability is because of getting fixed, to non-digital currencies, like the dollar and pounds.

The question now comes; where lies the fate, of these currencies, when Libra experiences a drop in value? You can ponder on this!

Bringing back Libra out of this plunge could bring about, getting liquidity, so large that, a country might not be able to provide.

The potential risk that Libra poses, in this regard, maybe a major factor that might not see it fly, moving forward.

National Security

The social network giant appears to be more powerful, than some nations and it leaves critics, to imagine that, Libra has the tendency, to blow up tensions.

Stoller, also, shared his thoughts on this.

“Sanctions enforcement flows through the banking system — if you can’t bank in dollars, you can’t use dollars. With the success of private parallel currency, government sanctions could lose their bite.

Should Facebook and a super-majority of venture capitalists and tech executives, really, be deciding whether North Korean sanctions can succeed? Of course not.”

In addition, Facebook might find it, quite a challenge, to control financial transactions of terrorists.

This and many more, lies among the dark side, of the financial structure, which Facebook, on its platform, has not been able to arrest.

From all indications, one cannot say, if the Libra project would fly.


Featured Image: Labrys.io


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