Nearly everyone around the world is familiar with Facebook. How could they not be? Out of the 7.7 billion people in the world, 2.4 billion of them use Facebook on a monthly basis. With so many users, their next venture is all about penetrating the cryptocurrency market. If 2.4 billion people were to use the same currency on a daily basis, the number of daily transactions in one system would be astronomical.
Currently, the United Nations recognizes 180 currencies around the world, and Facebook is working diligently on making that 181. Libra, is the digital currency Facebook hopes to bring to the world in 2020, but it’s been met with more than pushback and concern.
The purpose of Libra is to increase access to bank accounts for people around the world. Their mission statement is, “A simple global currency and financial infrastructure that empowers billions of people.” It’s estimated that roughly 1.7 billion people around the world don’t have a bank account and Facebook hopes to be successful with Libra to provide easier access to funds and save some of the $25 billion lost to migrants every year through remittance fees.
Facebook has sought the help of Visa Inc., Mastercard Inc., and other card processing systems to help build and maintain the Libra payments network. The opportunity to team up with a company that holds one-third of the world’s population could change the entire world as we know it. Many financial experts are concerned that Libra could further diversify Facebook’s revenue and transform the digital economy over the long term.
It’s important to note that Facebook does not control Libra. The Libra Association is a non-profit organization based in Switzerland that is comprised of nearly 100 companies. Currently, Facebook, Uber, Mastercard, and Andreessen Horowitz are part of the companies that shape this association.
As data becomes a more sought-after commodity, Facebook’s fast and loose policies have their backers, and many others, worried. The concerns around Facebook’s involvement with Cambridge Analytica, Russian operatives, and other unsubstantiated claims on their platform have many people concerned with Facebook regulating themselves when it comes to currency.
The U.S. Federal Reserve, Treasury Department, House and Senate banking committees, EU antitrust officials, and others have their reservations about Libra and are attempting to stop any further development of the currency.
As of October 1, Visa and Mastercard have reconsidered any further involvement with Libra and are strongly considering removing themselves entirely. Concerned about attracting any further scrutiny, many of Libra’s backers have declined Facebook’s requests to publicly support the project.
On Oct. 14, representatives from backing companies are scheduled to meet to review a path for the Libra Association and nominate a board of directors.
Libra faces many regulations, skepticism, and how much Facebook is involved, and to add to the concerns their top executives are all on Facebook’s payroll. Much of Libra’s code is open-source, it just so happens that Facebook’s developers are doing the majority of work developing it.
Although Facebook won’t be in control of Libra, they are spending a substantial amount of their resources on something they won’t recuperate the costs on. One senator, John Pavlus, says that it would be delusional to trust Facebook with the launch of Libra.
The missing piece to the Libra puzzle is Calibra- the digital-wallet that would be required to utilize Libra. Calibra is 100% owned and operated by Facebook and would be built into all of their platforms. “Technically, anyone can develop a (digital) wallet to handle open-source Libra. I expect the vast majority of people to use Calibra from within existing Facebook apps because billions of people use those products every day,” said Kevin Weil.
What Happens Next
While Facebook is doing its best to rebuild trust in them, their current persuading of consumers changing their current currency for a digital one remains to be seen.
It’s reported that many of the organizations that signed nonbinding letters of intent haven’t paid the $10 million Facebook requested to fund Libra. As litigation and skepticism ensue, Facebook surely faces an uphill battle.
We have all come to learn and love Facebook, but what is it that keeps us coming back time and time again? Read how Facebook is killing us all and why we let it.