Facebook says its Libra payment platform is a social impact project that promises benefits to the poor and unbanked. Others say it’s an obvious play to be a global financial services giant with a virtual currency of its own invention, brazenly ignoring the global financial regulatory system. NGO Mercy Corps, the only humanitarian aid agency involved, is lending its hard-earned credibility to that social impact promise, but at what cost?
“Technology has improved the world around us” is the bold opening statement for the Libra commercial released last week announcing the launch of Facebook’s new digital currency.
Designed to “transform the global economy,” Libra, including a virtual currency “coin,” promises to help the 1.7 billion unbanked around the world by empowering them to send, receive, spend, and save money through an app. It’s a feel-good, two minute commercial with inspirational music, following people around the globe at marketplaces, food stalls, doing transactions, and sending messages on their mobile phones.
If this feels like déjà vu, it’s likely because Facebook’s other social impact initiative, Free Basics, promised to introduce the internet to people in the developing world through a free app, using a nearly identical commercial and PR strategy. 6 years later, the program has since been dubbed the “poor internet for poor people” and offers limited internet content that’s been carefully curated by Facebook, who seems to be the one profiting from the initiative, through users’ clicks and data.
The Libra Association is a 28-member grouping based in Switzerland and composed of a Facebook subsidiary as well as other big tech giants, financial companies, e-commerce, and vendors including Uber, venture capital funds, telecoms, microfinance, fintech, and one big anomaly — Mercy Corps.
So, what is a major humanitarian organization doing on that list?
Mercy Corps’s CEO Neal Keny-Guyer issued a blog justifying the partnership. It outlines five areas where the organization sees opportunities for potentially incorporating Libra as a social impact partner: financial assistance for people living in conflict areas, reducing the cost of remittances, access to financial services through a blockchain-based ID, potential for innovation, and increased efficiency in aid distribution through blockchain.
Keny-Guyer’s post fails to explain however what influence Mercy Corps expects to have with this partnership, if it will receive compensation as a prominent social impact partner, or what kind of risks it has considered. (Mercy Corps also could not comment on any non-disclosure agreements it may have signed).
Beneficiaries deserve programs that are transparent and carefully developed, keeping the ‘do no harm” principle that’s central to humanitarian work — yet this post fails to provide any meaningful discussion of risks or any justification beyond the importance of having a seat at the table.
In fact, Mercy Corps’ statement misses the mark so much that, in the middle of describing how the currency will “give anyone equal access to digital banking” there is a photo of a girl and her grandfather in Syria — a country where US financial sanctions were imposed since 2012 which severely limit banking services. Restrictions are also imposed on sending money to other countries under sanctions like Venezuela, North Korea, and Iran, making the Libra coin not so borderless after all. The challenges of financial regulation and counter-terror finance compliance will not be magicked away by Libra.
While Mercy Corps claims they see potential in use of this cryptocurrency in its programming, a better question to ask is why Libra would want to offer Mercy Corps a seat at the table and give it voting power. (Other NGOs with a turnover above $50 million may be eligible to join Libra later.)
The answer is simple: Libra is being branded as a tool that will help millions around the world, and it needs Mercy Corps for this humanitarian washing. This is not unlike justifying paying $5 for a latte because a company donates 10 cents to farmers in developing countries, where the coffee beans were likely bought on the cheap.
To illustrate how this technology has the potential to further improve the world, the Libra commercial goes on to say “Money should be fast for Ope in Lagos, simple for Sal in Manila, and secure for Betsabe in Mexico City.”
The truth is that Libra won’t work for Ope, Sal, or Betsabe, quite simply because it’s not designed for them, despite what Libra may claim. Mercy Corps is the only member of the Libra association who works with these beneficiaries, which is precisely why Facebook needs its name and reputation.
And indeed, the paradox central to Libra as a humanitarian tool that will solve poverty is that some of the companies behind the digital currency are likely exacerbating poverty in these countries where they want to help people by taking advantage of cheap and “gig” labor and data mining.
This humanitarian branding of Libra’s business alliance may also create more challenges for Mercy Corps and other NGOs that rely on a reputation for neutrality and impartiality. With inappropriate partnerships or “dual-use” technologies, can cause a reputational backlash. Humanitarian values are already being questioned, given their misuse to justify military interventions, biometric surveillance, and now, supposedly, a completely new financial system. Worse even is when beneficiaries lose trust in an organization once they learn their data is being misused, shared or traded without their consent, or not protected.
There are many problems with the logic of Libra as a humanitarian tool, and without that ideology, we’re left with what Libra really is — a beautifully-designed diffusion of legal responsibility. Since the current Libra association setup leaves no one actor in charge and therefore makes no one accountable, it seems to be trying to bypass financial regulatory protections that have vexed other blockchain remittance schemes.
There are many ways that Facebook and its subsidiaries stand to profit from this scheme, like more revenue from ads, user data, transaction fees and the management of the assets held in a proposed Libra fund. So let’s not buy into the narrative that Libra is a humanitarian tool, but rather that Mercy Corps might be a humanitarian fig leaf.