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article imageQ&A: Privacy insight on Facebook’s Libra Special

By Tim Sandle     Jun 23, 2019 in Technology
Facebook is creating a new open-source digital currency called Libra. Through the new coin, Facebook could quickly establish a dominant position in global finance. This raises serious questions of data privacy for prospective users.
The goal of Libra is to provide a platform for developers to create services for consumers to send money around the world easily and for free. While this will make some transactions easier, many are concerned with the prospect of Facebook having this much power, not least because of Facebook's record when it comes to data privacy issues.
READ MORE: Facebook ready to launch its first cryptocurrency
Ray Walsh, digital privacy expert at ProPrivacy.com, provides insight as to why Libra might not be in the best interest of consumers, especially when it comes to the issue of data privacy.
Digital Journal: Before we get to Libra, do we actually need a global currency?
Ray Walsh: In some locations around the world, it can be hard for people to get bank accounts, especially women. Cryptocurrencies like Libra have the potential to improve life for those people by allowing them to store money in an online wallet. This allows people to store value and exchange it without the need for a traditional bank account. This can give large numbers of disenfranchised people new opportunities — including the ability to engage in freelance work online, for example.
Cryptocurrencies also have the potential to allow people to move money around without the need to change money from one physical currency to another. In theory, this allows people to move money from one place to another without being exposed to high transaction fees and losses due to exchange rates.
This is great for remittances, which has been one of the best examples of a real-world usage case. The successful use of cryptocurrency for remittances led to the adoption of existing crypto assets such as Bitcoin.
As to whether we need a global currency, this question is complex and is probably better suited to an economist. However, it seems fair to say that in a world where e-commerce is already reshaping traditional models, a globally accepted currency with a stable value appears to have genuine potential and appeal.
Libra is the new virtual currency from Facebook and partners seeking to bring financial and e-commer...
Libra is the new virtual currency from Facebook and partners seeking to bring financial and e-commerce to more than a billion "unbanked" people worldwide
Handout, Libra Press/AFP
DJ: Why is Facebook proposing a digital currency? What's in it for Facebook?
Walsh: Facebook’s proposal is for a digital asset that is tied directly to currencies such as the Dollar, the Pound, and the Euro. This kind of cryptocurrency is commonly referred to as a “stablecoin” because its value is directly tethered to the value of traditional physical currencies.
It seems likely that Facebook plans to create a revenue stream from taking a small cut when a transaction is made. Even if this transaction fee is very low (to make Libra attractive as a currency) if Libra is adopted around the world by its 2.3 billion users — it could lead to large profits.
DJ: What benefits are there for consumers?
Walsh: If the currency is accepted all over the globe, it allows people to move money around and spend it without the need to constantly exchanging currency. It also allows consumers to move money around and receive payments in a location where they don’t have a bank account and are therefore unable to usually do so.
Facebook may also make it easier for people to purchase products from within its platforms using its coin, and by providing special offers this could be used to encourage consumers to adopt it.
DJ: What are the data privacy issues associated with the planned cryptocurrency?
Walsh: For the time being, we don’t know what privacy policies Facebook will have in place for this new cryptocurrency. However, putting Facebook in charge of yet more consumer data will only allow the firm to gain better insight into people’s spending habits. For consumers, the danger is that Facebook will gain even more control over influencing them via advertising, which may lead people to be coerced into spending beyond their means.
Facebook has promised not to use data amassed from the Libra blockchain to improve ad targeting without the consumer’s consent. This is troubling because if Facebook's previous services are anything to go by, it seems likely that consent will be linked to Libra from the get-go — giving Facebook users little option but to agree should they want to take advantage of the ease of use provided by integrated Libra payments across its platforms.
DJ: What are the cybersecurity concerns?
Walsh: Facebook has proven itself to be a terrible custodian of people’s data. The idea that the social media will hold transaction data, sensitive personally identifiable information and social media data in a single cache seems extremely concerning because it will be a hugely tempting target for hackers.
DJ: Do you think Libra will be a success?
Walsh: Yes, it seems likely that cryptocurrencies are now well known enough for Facebook to find ways to make the general public uptake Libra coin across its platforms. After all, Facebook has 2.3 billion active users, which means that even if only a small percentage start using the coin to purchase goods on its platforms — it stands to do extremely well.
More about Libra, Facebook, cryptocurrencies, Crypto
 
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