Is Facebook’s Libra Going to Ruin Blockchain?
For all that blockchain technology has developed and become more user-friendly, there has been no one product to bring it to the masses. Cryptocurrencies are something people know about and talk about, yet just 8% of people actually interact with it.
It still feels as though, despite the leaps and bounds made by the community, that we are some way from blockchain technology becoming the household name many expect that it will.
The Big Names Want a Slice of the Pie
This is, predictably enough, where companies like Facebook get involved. Having made it its modus operandi to build products for unparalleled scale, the social media giant’s announcement it has built a blockchain product suggests that it intends to get fully behind distributed ledger technology and be the first household name to push it as part of its service. The product to kickstart this launch is Libra, a Facebook-built cryptocurrency with a corresponding blockchain and wallet.
Libra will be facilitated by Calibra, a crypto wallet which will operate as a standalone app and through buttons on Messenger and WhatsApp. What will begin as a peer-to-peer transfer service will eventually grow to accommodate purchases on Instagram. The ecosystem Facebook is building will be managed by the Libra Association, a group of big-name players that will govern what Facebook hopes will become the “internet of money”.
Crypto’s New Oligarchy?
28 companies including Mastercard, PayPal, Visa, eBay, Lyft, Vodafone, Spotify and more have signed up to be founding members of the association. Each of them has — as any new member will also be required to — invested $10 million dollars in the project. Facebook has revealed that it wants to reach 100 members before the currency is officially launched, which will see them meet in Geneva, Switzerland every two years.
It’s an elite club — members must hit two of three criteria from a $1 billion market value or $500 in customer balances, a reach of 20 million people a year and/or be recognised as a top 100 industry leader. These will be supplemented by blockchain businesses, crypto-focused investors, research institutions like universities, and not-for-profits working in financial inclusion.
TechCrunch describes the Libra Association as “crypto’s new oligarchy”, which feels apt. It is not quite a dictatorship or a monarchy — Facebook has distanced itself from anything resembling direct control over the crypto. It’s easy to see why; Mark Zuckerberg’s behemoth has already been subject to a cascade of scrutiny from regulators over what has been chronic mishandling of user privacy and user data. Facebook, like all other members, will only get up to one vote or 1% of the total vote (whichever is larger), a functional decentralisation designed to protect Libra from potential hijacking.
Unlike more unpredictable cryptocurrencies like Bitcoin, Libra is “tied to a basket of bank deposits and short-term government securities for a slew of historically stable international currencies, including the dollar, pound, euro, Swiss franc and yen,” according to TechCrunch.
Libra Represents a Worrying Power Shift
Regulators will want to get a handle on Libra as quickly as possible, though. A long way from the libertarian ideals visible in other blockchain projects, Libra threatens to take control of monetary policy away from central banks and governments, handing it over to this new ‘oligarchy’ with Facebook at the helm. Libra, rather than stripping away arguably oppressive financial structures for users all over the world, is threatening to add a layer of corporate control over money, between central banks and the people.
No matter how ‘progressive’ companies built in the digital era would like to present themselves as being, they are still businesses, with the good of the business itself being the ultimate goal. Governments, in theory, have the wellbeing of the country and the people within it as their chief concern. If governments work as they should — and many don’t — then monetary policy is set so that the people can benefit. Libra potentially shifts the fundamental control of some of that policy to corporates, which is not what blockchain initially set out to achieve.
The threat goes deeper, too. In emerging markets, the offer of a stable, global coin in which to trade would be an enticing one. This could see those building businesses in these regions trading out there local currency for currencies like Libra, essentially stripping control away from the governments trying to regulate and monitor their monetary supply. Even the most ardent libertarian would surely be uncomfortable with power being shifted from developing world central banks to the multinational tech behemoths which already have a powerful influence in so many aspects of our lives. Libra could push cryptocurrency and blockchain technology to the forefront, but at what cost?
