It’s been nine days since Facebook announced the Libra, a new currency for the world, and we’re still alive.
Nothing has launched, and it won’t until at least 2020. Despite ominous warnings, terrorists aren’t laundering money—or influencing elections—with Libra just yet. But the forthcoming global token has caused some anxiety among policymakers, and justifiably so.
US congressional committees have scheduled hearings on the Libra for mid-July, and the G20 plans to discuss the Facebook-led initiative at its meeting next month. The Bank for International Settlements worries Libra could pose a risk to financial stability, and on Tuesday, Federal Reserve chairman Jerome Powell said, “Given the possible scale of [Libra], I think that our expectations—from a consumer protection standpoint, from a regulatory standpoint—are going to be very, very high.”
Fears about financial privacy and the possible dollarization of developing nations, as well as awe regarding Facebook’s e-commerce aspirations have rapidly diverted attention from the social media giant’s impending antitrust showdown. The Libra’s announcement effectively functioned as a bait-and-switch, shifting the conversation about why society should actually be worried about Facebook.
Understood this way, Libra isn’t a new financial tool aimed at expanding banking in the developing world (the most charitable interpretation) or a ruthlessly efficient way of tracking consumer behavior for advertisers, a more cynical view. Rather, it’s a demonstration of how aggressively CEO Mark Zuckerberg is trying to get ahead of regulators—so much so that he’s invented his own money. And with 2 billion users at its disposal, Facebook may well succeed.
Libra is more than a digital version of the dollar or the euro, sprinkled with some blockchain dust. If it achieves its grand vision, Libra could become the global standard for money. That’s what’s most awesome (and frightening) about Libra.
Paired with existing services like Messenger and WhatsApp, Libra could also give Facebook a permanent foothold in digital life. Even if regulators succeed in splitting those services from Facebook’s umbrella, Libra would tie them together as a unit of account. The genius—or madness—is that Facebook has managed to convince 27 other partners to assist it in this endeavor, deflecting some attention from its corporate expansion. Nominally, they’re equal partners in the Libra Association, but Facebook is clearly at the helm.
Key to Facebook’s strategy will be how it approaches identification. If the Libra Association creates a global identity standard, as planned, a Facebook ID could become an internet—or even government—standard, not just a website integration. Once that happens, breaking up Facebook could be merely symbolic, because it will have become indispensable.
Already the company has far more information on its users than most competitors. Changpeng Zhao, CEO of the cryptocurrency exchange Binance, joked that Facebook doesn’t even need know-your-customer standards used to prevent financial crimes.
“They have so much more data on the 2 billion people,” Zhao tweeted. “Not just name, id, address, phone number. They know your family, friends, real-time/historic location, what you like… They know you more than yourself. And now your wallet too.”
Libra may be part of Facebook’s vision for the web and a mechanism for further expanding its global reach. It may even help draw people without bank accounts into the global economy. But it should be understood within the context of the company’s defense of its business units. Facebook isn’t going down without a fight.
- Bitcoin just blew past $13,000 (Quartz)
- Libra could aid financial inclusion (Cato)
- The Libra faces significant regulatory roadblocks (Stanford Law)
- Congressional hearings on Libra scheduled for mid-July (The Hill)
- Libra isn’t a technical problem, it’s a social one (Foreign Policy)
- Square Crypto made its first hire (Twitter)
- When Facebook acquired Chainspace, a blockchain scaling company, cofounder Mustafa Al-Bassam decided not to join. On Tuesday, he explained why he’s disappointed by Facebook’s technically conservative vision for Libra. (Twitter thread)
Please send news, tips, and other astrological signs to firstname.lastname@example.org. Today’s Private Key was written by Matthew De Silva, and edited by Oliver Staley. The only source of knowledge is experience.