A short piece to pen some thoughts about Facebook’s foray into creating their own currency, Libra. Simply put, it’s an excuse for Facebook to get even further entrenched into our lives, and to further evade tax.
Let’s backtrack a little first. Why have Facebook created Libra? They say they want to connect ‘billions’ of people who do not have access to banking platforms and out of 2.4 billion monthly users, there must be a lot of users who fall into that category. It is based on blockchain technology, with the currency underpinned by global assets. In theory it should not be as volatile as Bitcoin. It will of course be hugely integrated into Facebook.
Let’s start with existing apps and platforms. Sending money to a friend? Then you have WhatsApp and FB Messenger. Want to buy a product you’ve seen through an ad on Instagram? One click and done. Libra credit? Mastercard and Visa are happy to provide it. Facebook want to essentially own the entire vertical that is your life, it’s not something they’ve shied away from and Libra is another step towards that.
Facebook will initially fund it by charging other – there is a $10m fee to join the non-profit, independent of Facebook organisation, ‘Calibra’. Consumer brands like Uber and Lyft will be joining more traditional financial companies to oversee the progress, with priorities being to create a crypto wallet – your central focal point. In theory this independence should ensure Facebook does not control the currency. In practice call me sceptical.
That scepticism arises because of Facebook’s dubious past with privacy. To say they’ve had issues is an understatement to say the least, but this new venture takes trust to a whole new level. This is not an open ledger blockchain, but a closed system. Effectively, do you trust the ‘Bank of Facebook’?
It say’s something about how well the regulators and politicians have done in the wake of the Cambrige Analytica debacle (still no fine has officially materialised) that Facebook are confident in launching something as controversial as this currency – even with the checks that they’ve put in place.
Then we get to the more complex subjects such as financial regulation and tax. Crypto currencies like bitcoin have been a headache, but how do you deal with a company that decides to operate in its own currency? How can you ensure the right oversight for money laundering? Facebook are creative with taxation as it is, will they be able to avoid tax completely with Libra?
Oh so many questions, and we’re only at the beginning of something potentially revolutionary.