Regulators will be watching closely when Facebook Inc. unveils its cryptocurrency project this week. Their vigilance is warranted.<\/p>\n
Mark Zuckerberg, the social network\u2019s founder, isn\u2019t going to gamble with what remains of his public image by replicating the worst excesses of the Bitcoin craze. He\u2019s not trying to create a speculative currency; a potential wave of mom-and-pop investment losses is the last thing he needs.<\/p>\n
He just wants a digital medium of exchange. Nevertheless, his bid to launch an online payments revolution carries plenty of risks, from antitrust concerns to the threat that it might pose to financial stability.<\/p>\n
Weekend media leaks suggest that Facebook\u2019s \u201cLibra\u201d project will be a continuation of its past efforts to expand its payments business and keep customers within the walled garden of its social media apps by creating their very own money.<\/p>\n
While Zuckerberg is poised to unveil a team of partners \u2013 reportedly including eBay Inc., Farfetch Ltd., Spotify Technology SA, Uber Technologies Inc. and Vodafone Group Plc \u2013 so far this feels very much like Facebook\u2019s baby. Tellingly, it\u2019s not one that the big banks or the other Silicon Valley and Seattle giants seem ready to adopt quite yet, unless Zuckerberg surprises us with some bigger names at the launch. The target customer base for these new digital tokens looks certain to be the 2.6 billion-strong users of Facebook, WhatsApp and Instagram.<\/p>\n
While Facebook will no doubt assure us that this project is all about making the lives of its customers ever easier, giving them the ability to actually buy stuff in a way that Bitcoin has rarely offered, it\u2019s hard to square it away with the political effort to curb Big Tech\u2019s monopolistic tendencies (regardless of that roster of launch partners and their $10 million participation fees).<\/p>\n
It\u2019s crucial that Libra doesn\u2019t become a protective glue that binds Zuckerberg\u2019s social networks even more closely together at a time when many regulators want to break them up. Libra will be presented as an open-source partnership whose benefits are available to all, but to what extent will it really be held at arm\u2019s length from the Zuckerberg empire? Indeed, if the financial and business benefits of using Libra accrue mainly to Facebook, it will merely enshrine its market dominance.<\/p>\n
As such, regulators must find out who will own the giant new datasets. They might even want to push the case that this kind of data should be made available to governments or rivals to avoid the problems of the past, where a handful of companies ended up owning all of the information about our online activities.<\/p>\n
While Facebook barely makes any money from its payments business today \u2013 with payments and other fees accounting for less than 2% of last year\u2019s $55.8 billion of revenue \u2013 some analysts reckon Libra could change things. Barclays is reportedly predicting $19 billion in additional revenue by 2021 if the tokens gain traction. Libra is scheduled to launch across a dozen countries in 2020. That\u2019s a lot of potential data and new sources of revenue.<\/p>\n
Financial stability is a worry too and regulators should ask for transparency on how Libra is structured. The token is expected to be a \u201cstablecoin,\u201d which is pegged to existing fiat currencies such as the U.S. dollar or the euro. That will damp price volatility, unlike the free-wheeling Bitcoin, whose price in the past five years has gone from $600 to $19,000, and now to $9,000. Regulatory oversight of which currencies are held in reserve to back the Libra coin would go some way to building faith in Facebook\u2019s capacity to redeem tokens when customers ask for it.<\/p>\n
While no one wants to choke innovation unnecessarily, Facebook hasn\u2019t exactly done much to earn everybody\u2019s trust in recent years. Any chance to put the necessary controls in at the beginning, rather than firefighting down the road, should be grabbed by the regulators.<\/p>\n
Regulators will be watching closely when Facebook unveils its cryptocurrency project this week. Their vigilance is warranted.<\/p>\n","protected":false},"author":341034,"featured_media":221973,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_sma_x_autopost_status":"idle","_sma_x_autopost_error":"","_sma_x_post_id":"","_sma_x_attempts":0,"footnotes":""},"categories":[44696],"tags":[59551,187,161],"class_list":["post-310385","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-cryptocurrency","tag-answer","tag-bitcoin","tag-facebook"],"_links":{"self":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/310385"}],"collection":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/users\/341034"}],"replies":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/comments?post=310385"}],"version-history":[{"count":0,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/310385\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media\/221973"}],"wp:attachment":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media?parent=310385"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/categories?post=310385"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/tags?post=310385"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}