Facebooks new Libra currency is shaking up bankers and financial groups
Facebook, the big social networking platform has gotten on the blockchain bandwagon and released news that they have developed a digital currency called Libra.
Facebook seems to be trailing on the steps of decentralized currencies like Bitcoin with and the Altcoin side of things to a certain degree, this announcement has created ripples in the banking and financial world.
4 billion people use Facebook each month, it is a powerful beast that covers continents and countries alike, some of the members of the website do not have bank accounts and this who Facebook want to connect with, so they say. They ideally want to allow users to be able to send and receive digital transactions via its widely used platform.
The technology to send the digital currency will be integrated into the Messenger and WhatsApp platforms, it is likely users could be able to tip for showreels and posts as well as pay for items on the Marketplace but little details have been released about it.
The Cryptocurrency may well not be so decentralized and heavily controlled to begin with or at least prioritised by dozens of companies including Coinbase, eBay, Kiva, Mastercard, Mercy Corps, PayPal, Lyft, Uber, Women’s world banking.. The list goes on. Each organization had to donate a minimum of $10 million US dollars to the new venture which gave Facebook more that $1 billion US dollars to put toward and develop the currency.
Libra will have its foundation in Geneva, Switzerland. Facebook claims it will be independent of the company itself as well as governments, the Libra foundation will take over control of the digital dollars with a collective of finance, tech companies and nonprofits making decisions, overseeing governance and implementing updates to the blockchain and real-world applications like payment gateways and so on.
Traditionally with cryptocurrencies all transactions and peer data is publicly viewable on a block-explorer via the internet on a web browser, this allows you to follow transactions as they confirm as well other important information about the wallet holdings and coin/network information, this will not be the case with Libra as their blockchain will be closed and only a selected number of people will be allowed to run the node software that will verify transactions, as well as gaining the block rewards from running the trusted Libra nodes.*
- Nodes exchange information and relay transactions whilst verifying them, they secure the blockchain network overall.
A document outlining how Libra will work showed Facebook’s goal of “better, cheaper, and open financial services”, they said it will be tied to a mix of global assets preventing the market volatility that is common with digital currencies, a stable coin of sorts.
Libra could be a massive money spinner for the company but US lawmakers were quick to jump on the bandwagon raising concerns about the currency including privacy, not one practice that Facebook is totally au fait with.
Just after the social media platform announced Libra, the congressman of the House Financial Committee, Maxine Waters, called on the company to stop the project until Congress and legislative organizations could review it also instructing company executives to attend the committee and testify.
Waters said in a statement “Facebook has data on billions of people and has repeatedly shown a disregard for the protection and careful use of this data, with the announcement that it plans to create a cryptocurrency, Facebook is continuing its unchecked expansion and extending its reach into the lives of its users.”
The problem is how Facebook could potentially use the information it knows about it social media base to profile and target financial decisions.
Back in May 2019, members from the US senate committee on banking, housing and urban affairs wrote to the CEO of Facebook Mark Zuckerberg asking for him to answer questions on financial regulations and privacy concerns.
Part of the letter said:
“It is important to understand how large social platforms make data available that can be used in ways that have big implications for consumers’ financial lives. It is also important to understand how large social platforms use financial data to profile and target consumers.”
Besides all of this Facebook says it will allow unbanked users of the platform to be able to enter the banking eco-system flawlessly.
Facebook entering the crypto scene is a big thing for further adoption of the technology but they will need to get over many hurdles before it is allowed to go mainstream, they want to innovate on financial technology and systems will be in place to detect fraud and money laundering using the same verifications systems that banks and credit card companies utilize.
With a massive user base Facebook have customers for their crypto right out the box and no doubt many vendors and services could benefit as well as individuals the world over. We should be excited about this but also careful with any financial systems especially where privacy concerns are raised.