There are multiple reason why companies are abandoning their support for Libra. For some it is simply not commercially viable, for others Facebook’s Libra poses as a potential cybersecurity threat to financial services companies, such as Visa and MasterCard. Others are uncertain whether Libra’s proposed blockchain digital currency will actually benefit consumers.
To understand some of these perspectives, Digital Journal spoke with ProPrivacy’s Damien Mason.
Digital Journal: What is Facebook trying to do with Libra?
Damien Mason: While cryptocurrency no longer belongs solely to enthusiasts, it’s still a volatile payment system that isn’t embraced by the larger population. Websites that support online currencies tend to default to Bitcoin, often ignoring Ethereum, Zcash, Monero and other alternatives that are out there. Given that Facebook already has a large user base and widespread integration with third-party websites, Libra is the company’s attempt at establishing a more mainstream cryptocurrency with much wider support.
In concept, Libra is perfect for an estimated two billion people that don’t have a bank account, allowing them to secure their money without paying in cash. Conversely, there are many worried that this is Facebook simply sticking its finger in another pot to further diverse Mark Zuckerberg’s empire.
DJ: How different is Libra to other cryptocurrencies?
Mason: While pioneering cryptocurrency, Bitcoin has continuously suffered from instability with its value fluctuating in short spaces of time. This unpredictability places it more in line with the pacing of the stock market than its original intentions of establishing an online economy.
Facebook Libra eschews this uncertainty by following in the footsteps of MakerDAO as a Stablecoin, the term given to crypto that fixes its value against another single currency in order to maintain a pegged exchange rate. This allows Libra to reflect physical currencies, which is much more accessible to the general population.
DJ: Is Libra really needed?
Mason:Communities are steadily moving towards a cashless society by relying on credit and debit cards, with some even looking towards subdermal chips to get the job done. Much like these methods, Libra isn’t needed per se, but the concept is a necessary step in progressing towards an online economy. The investment of a sizeable company like Facebook could help motivate regulators to define laws around the emerging technology and truly make cryptocurrency the future of payments.
DJ: Why have major investors started to pull out of supporting Facebook?
Mason:Tantalized with the idea of being at the forefront of innovation, major investors were blinded by promises that Facebook was set to change the world but were instead met with scrutiny by lawmakers that don’t quite know how to handle the situation. The fault lies with the social network trying to run before it can walk, diving headfirst into the unknown and effectively leaving officials with bated breath.
Most former backers continue to be supportive of Libra, wishing for its best success but simply don’t want to risk being caught in the web of regulatory scepticism as Facebook irons the creases. Should the social media company cautiously take the next steps with a smaller handful of support and transparency with governments worldwide, its potential success could see these investors return.
DJ: To what extent was Libra a cybersecurity threat?
Many have expressed concern over the centralization of such a large operation, stating that it would give Facebook far too much control over the stability of economies. Even if laws were properly placed, the social network introducing weaker currencies into Libra’s fiat currency reserves could see unprecedented fluctuation.
Libra’s concept hopes to eventually replace banks without any proper answers to the security protocols it would be disrupting. Money would be significantly harder to trace, worrying officials that this could lead to misuse by enabling criminals such as terrorist financiers and money launderers to exchange funds undetected.
DJ: Would Libra impact on the data privacy of its users?
Mason:If Facebook hopes to quell the fears of watch dogs around the world by fixing these means of exploitation, it will have to come at the cost of user privacy by making everything traceable. That said, the social network is still struggling to please regulators with an assurance that it will only collect the minimum amount of data needed to run the service and leave the user in control of the information they consent to give.
Facebook is aware that its track record with privacy has been more than spotty since the reveal of the Cambridge Analytica scandal and is quick to shed itself of the responsibility. Instead, the company has repeatedly said that it will not have access to personal finances and that its partners would determine what information is required to operate. This doesn’t put anyone’s mind at ease however, as it remains uncertain just how much privacy Libra users would have once the service goes live.
