Facebook’s Libra invites scrutiny
Facebook is facing fresh scrutiny from lawmakers and consumer advocates over its plans to launch a new cryptocurrency, a project that could fundamentally alter the way millions of people exchange currency online.
The company’s digital currency project, Libra, is backed by dozens of powerful businesses, including MasterCard and Uber, and is slated to launch next year. Libra has branded itself as an effort to aid the “unbanked,” the estimated 1.7 billion people who do not have access to traditional banking.
Facebook’s toughest critics are seizing on the project with the company already facing a slew of other concerns over its market powers and privacy protections.
“We look forward to responding to lawmakers’ questions as this process moves forward,” a Facebook spokesperson told The Hill.
The proposal: Facebook’s cryptocurrency plans are an ambitious move for the company. Facebook on Tuesday said it hopes Libra makes transferring money as easy as sending a text message. The company is launching a new subsidiary, Calibra, tasked with rolling out the alternative financial system.
The cryptocurrency will be operated by a nonprofit called the Libra Association, headquartered in Switzerland, which will give Facebook one vote among many companies overseeing the project.
Facebook emphasized that the cryptocurrency will be governed by the Libra Association, a likely attempt to assuage concerns about the tech giant gaining too large of a foothold in the nascent digital currency industry. And the company has pledged that none of the financial customer data collected by Calibra will be shared with any other Facebook service.
The concerns: But consumer advocates insist that Facebook’s ownership of the project raises unavoidable red flags, considering the privacy and antitrust concerns that have swirled around the company for years.
“Facebook is about the last company in the world that should be given authority to develop crypto currency,” Marc Rotenberg, the president of the Electronic Privacy Information Center, told The Hill in an email. “Facebook does not protect consumer privacy. There is no reason to believe it will protect consumer financial transactions.”
David Marcus, who is heading Facebook’s cryptocurrency effort, on Twitter wrote, “we understand we will have to earn your trust.”
The white paper on Libra says Facebook created Calibra, the subsidiary, “to ensure separation between social and financial data.”
But there are lingering questions about whether Facebook will follow through on those plans and how it intends to achieve a total separation when Libra will be available in Facebook’s messaging services, Messenger and WhatsApp.
Some critics have said Libra is antithetical to one of the original goals of blockchain, which was to create an alternative payments option outside of traditional institutions. Libra is backed by some of the most powerful financial companies in the world.
“Technologies like blockchain were touted as helping to break the hold of large platforms,” Sen. Mark Warner (Va.), the top Democrat on the Senate Intelligence Committee, said in a statement. “Instead, we see Facebook using its scale to blunt the promise of decentralizing technologies.”
