‘Putting the cart before the horse’. ‘Closing the barn door after the horse has bolted’.
The first was the blunder, the second is the unenviable task now facing Facebook in the face of simmering opposition to Libra, the cryptocurrency it plans to launch by early 2020 in partnership with other major companies such as Uber and Visa.
More should have been done ahead of time to engage and educate key lawmakers, consumer groups, and regulators to address concerns about privacy (expected given the company’s recent history) as well as possible systemic risks to the financial system, while emphasizing how Libra could boost financial inclusion and economic empowerment.
Lack of Transparency
House Financial Services Chair Maxine Waters fired the initial warning shot after the June 18 announcement, calling on Facebook to halt progress on developing the cryptocurrency while referencing the multitude of data privacy scandals involving the tech giant over the past few years.
This request was reiterated in a July 2 letter to Facebook’s leadership from Waters and other senior Democrats on the committee, in which they cite “serious privacy, trading, national security, and monetary policy concerns.”
Their main complaint is what they describe as “the scant information” provided by Facebook about the intent, roles, potential use, and security of the Libra and Calibra (a subsidiary that will be created to handle the transactions). They argue this exposes both “the massive scale of the risks,” as well as an absence of clear regulatory protections.
Regulators around the world have also expressed reservations. Bank of Japan officials believe Libra will pose a risk to financial systems while free-riding on their existing structure, France is said to be forming a G7 task force, and the United Kingdom’s Financial Conduct Authority will be keeping a close watch.
Facebook failed to properly tell Libra’s story and promote its value. A global digital currency that improves access to financial services would be a compelling narrative for policymakers — not just Democrats. Millions of people use smartphones and have access to Facebook even if they don’t have a traditional bank account, allowing the company to introduce financial services to a significant number of unbanked people.
Where Are Their Allies?
More of could also have been before the public announcement, for example securing third-party surrogates — respected voices such as academics, think tank experts, former regulators, or data privacy experts — that could be deployed to counter expected opposition, educating key lawmakers, as well as ensuring regulators understand and were comfortable with the mechanics of Libra. It is never a good sign when regulators say they are still waiting to learn more about how service will work AFTER the grand announcement.
Facebook’s experience should be a lesson for any company or organization launching a service, product or venture that will attract public scrutiny.
Don’t assume there will be an immediate understanding and appreciation of its value and your company’s mission — identify and develop a strategy to educate your target stakeholders. In particular, recruit third-party allies to help spread your message, provide air cover against outside attacks, and get policymakers onside.