Facebook’s cryptocurrency, Libra, is set to debut sometime in 2020.
Understandably, it is being confronted with apprehension from lawmakers. They fear that it will disrupt the monetary system, and they don’t trust Facebook to be at the head of the platform at the moment. Libra has the potential to create a globalized currency, but it has numerous grey areas that are blurring this vision. Before delving into that, let’s gain a better idea of what exactly Libra is.
A cryptocurrency is a digital currency that functions without a centralized bank, and encryption methods are used to regulate it. The users themselves predominantly entertain most of the power over the cryptocurrency. Hence why Bitcoin is wildly unstable and risky to participate in. Libra attempts to combat that by using stablecoin. This maintains a 1:1 value, it translates over all forms of currency into the universal Libra. It’s backed by governmental assets from central banks. Therefore, for every dollar’s worth of Libra that’s created, a dollar is going to be put into the reserve. The goal is that this will create a stable and universal currency.
Under this framework, the reserve has the potential to maintain billions upon billions of dollars worth of currencies. It also marks the first time that private businesses could hold that power instead of the government.
All that’s required to create a Libra account is an ID and the user must have a phone with access to the Internet to utilize the app. Some argue that Google Pay, Apple Pay, and almost all virtual credit/debit cards can complete the same task, as it has become increasingly popular for people to use scanners and/or virtual wallets. Yet, there are two distinctions that must be made. Transaction fees will be lower than other traditional forms of payment and you don’t need to have a bank account to join Libra. For people who don’t have access to the banking systems most developed nations partake in, Libra is a way for them to use that currency and become more ingrained in the modern world.
What’s particularly interesting is that the currency will be held in a digital wallet called Calibra and to withdraw funds, the users will have the ability to convert Libra’s currency into cash based off of the exchange rate.
All in all it sounds rather exciting, but what are the drawbacks? The platform has major backers, Facebook, Spotify, Lyft, Uber, Thrive Capital and a handful of others. The main issue isFacebook. Libra was initially proposed by Facebook, and they’re taking the reins on the project. Once Libra is up and running, Facebook will presume its place as an equal backer. The problem with Facebook taking charge is that the government and the general public don’t trust the company. They’re predominantly concerned over privacy rights. Facebook has flatlined in this category, as the Cambridge Analytica scandal (when Facebook let Cambridge Analytica use its data to promote propaganda on their platform in hopes of influencing swing voters in the 2016 election), clearly supports.
When users are active on Libra, it combines their identity, online habits and spending patterns into an enormous database that’s available to Facebook. Libra will create a traceable record of all of its users transactions, so lawmakers’ worries over privacy are validated. The general public cannot be exploited, and another Cambridge scandal cannot be repeated. People deserve transparency, when conglomerates treat individuals as parcels of data it dehumanizes us and makes it much easier to be taken advantage of. It seems like we must remind companies that behind every piece of data lies a person.
Now is where we wait and see how lawmakers respond to Libra, as Mark Zuckerberg continues to testify for the platform. As I see it, everything comes with a price whether it’s monetarily measured or not. The question becomes: is the general public willing to sacrifice their privacy and take a chance on a globalized currency?
