First it came for your holiday snaps. Then it came for your privacy. Now Facebook is coming for your money. Two weeks ago, the social media giant announced the latest initiative in its plan for world domination – a digital currency.
It is to be called libra, which is reassuring in an Orwellian sort of way. Its ostensible purpose is to enable people to send money around the world cheaply and easily. The ambition is even greater. Libra is to be not just a payment system, of which there are several already. It is to be the prototype of private money.
It is not surprising that Facebook has its eye on the financial services sector. Its social media platforms – the network itself, along with WhatsApp and Instagram – have 2.4 billion users worldwide. Yet the company is facing two existential threats. One is the risk that we have reached peak sharing. The other is a growing clamour – in Europe and also, crucially, in the US – either to regulate Facebook more stringently or to break it up on antitrust grounds.
By announcing its libra initiative, Facebook is trying to change the subject. And in fairness, the question it raises is a good one. Despite the advances in technological innovation of the past two decades, the task of sending money around the world is complex, expensive and rooted in the analogue era. There is also effectively a monopoly of the financial services industry crying out for a disruptive newcomer.
Sending money around the world is a global activity, and is especially important in developing countries, where many people and small businesses have limited access to banking services. Yet they increasingly have access to technology and the internet, and many of them may be Facebook users. There is therefore some commercial symmetry, as well as social benefit, in enabling the technology behind Facebook to make the transfer of cash simpler and cheaper than it is today.
Yet this is where the questions thrown up by libra begin, because its backers have made a flawed assertion about their initiative. It is that sending money around the world should be as easy as sending photos or text messages. It is one of several dubious premises upon which libra is based, and it is a notion that cannot be left unchallenged.
The global payments system is regulated and cumbersome, at least in part, for a good reason: to detect and prevent fraud and money laundering. Governments and central banks reserve the right to prevent payments from being made if they suspect that a crime is being committed. It may be possible, as libra’s backers argue, for payments to be cheaper and simpler to execute; it must not become possible, as they imply, to make them undetectable.
This raises the critical question at the heart of libra. It is not whether Facebook can be the disruptor of the traditional payments system – because it can, it has the technical skills and the captive customer base necessary to do so. Rather, it is whether the disruptor should be Facebook. The answer depends on one’s view of Facebook.
A good rule of thumb in life is to be against anything that Mark Zuckerberg, the chief executive and co-founder of Facebook, is for. This is not because his goofball utopianism is so intellectually threadbare, though it is. It is because he comes across as so dim. Zuckerberg’s pronouncements, fixations and lack of curiosity about the world are more laughable than sinister.
There is a dollop of Silicon Valley messianism about libra, an initiative of Facebook and 27 partners from the financial and technology sectors – though none is a traditional bank. It was launched in a blizzard of buzzwords such as “mission” and “empowerment”. It was presented almost as a fait accompli, with its regulatory and oversight structures, to all intents and purposes, already in place via the Libra Association, an “independent” oversight and governing body, which will be based in Geneva.
None of this would be objectionable if it did not obscure an underlying theme of libra. You will have no choice but to trust us with this digital currency, its backers seem to be saying, because you know we’re smarter than you. It is as if the Cambridge Analytica scandal and the crises of trustworthiness and abuse of power that have engulfed Facebook and other social media platforms in recent months never happened.
Yet trust must be at the core of any global payments system or cryptocurrency. The greatest inherent threat from any digital currency, including the various iterations of bitcoin, lies in usurping the role of central banks as the moderators of the global monetary system. This is especially the case in respect of libra, because, given the scale of Facebook, the new currency would have the potential to be of vast size and liquidity.
Facebook owns unimaginable quantities of personal information on its 2.4 billion users. Its handling of that information has raised legitimate questions of trust and transparency. Its social media platforms have been implicated in the disruption of the democratic process in countries as different as the US and Kenya. Enabling it to become the bank of choice for its users would give it potentially unlimited financial resources.
There is also another issue with Facebook. If it was a normal listed corporation without a single controlling shareholder, it would be subject to the discipline of the stock market and the scrutiny of investors, such as it is. But Facebook is not really that type of corporation. Zuckerberg owns a quarter of its shares, but has over half of the voting rights attached to its issued share capital. He is Facebook’s absolute ruler.
That ought to keep regulators and politicians awake at night. The smartest response to the launch of libra came from Mark Carney, governor of the Bank of England. He viewed the prospect of a new Facebook digital currency, he said, “with an open mind, but not with an open door”. That is about right. Libra is a good idea struggling to stay afloat in a sea of technical mumbo jumbo, intellectual nonsense, unprovable assertions and skewed notions of what constitutes money, units of exchange and stores of value.
The paradox of libra is that only a company with the chutzpah and technical know-how of Facebook is equipped to launch such a technologically complex and intellectually challenging initiative, and that the initiative is dubious precisely because it comes from Facebook. The problem with libra is not libra; it is not even Mark Zuckerberg. It is Facebook.