Facebook’s announcement of its plans to introduce Libra, a global cryptocurrency focused on achieving the financial inclusion for unbanked people, spurred substantial backlash over data privacy and security issues from governments and their regulators. Libra has faced cynicism in relation to the social media giant’s controversial past regarding its failed attempts to protect users’ privacy.
While the governments’ main focus is on the regulatory issues, the industry experts believe Libra plays a more significant role for the crypto community in general and the development of the digital economy. Nonetheless, Facebook’s blockchain project seems to affect on every aspect of the modern digital economy and appears to have all-encompassing influence.
Mass adoption of cryptocurrencies and digital payments
This pessimistic approach of governments and regulators towards innovative technologies is however, nothing new. From an innovation aspect, Libra as a blockchain-based digital currency presents the next step in the evolution of money: an inflection point in the form of financial solution created not by governments and central banks, but the private companies which will ultimately disrupt the deeply ingrained monopoly set up by the mainstream money systems.
During the latest episode of Financial Fox, hosted by PR guru Stefania Barbaglio, Jared Tate, founder of DigiByte, explained that Libra symbolises significant validation for the novel blockchain technology, and starts to forge a new path for the future of finance and the crypto technology. Due to its pre-existing association with a well-known name such as Facebook and its 2.5 billion users, Libra stands a chance of becoming successful, and is essentially expected to be an advocate for cryptocurrencies, encouraging a lot more people to step into the crypto space.
As such, even if deemed unsuccessful, Libra symbolises an important first step towards the mass adoption of cryptocurrencies. It will allow for a large segment of the public to get familiar with the crypto space and educate them on fundamental concepts and the key idea of controlling their own funds, as claimed by the Charles Hoskinson, founder of Cardano, during his conversation with Stefania Barbaglio for the Financial Fox Crypto Show.
Issues on data privacy and the control of technology market
Due to its potential for mass-adoption, Libra raises serious questions on the aspect of regulation and as such has been greeted by backlash from the regulators and members of traditional financial institutions, mainly over serious concerns as to whether the digital currency threatens the stability of the US dollar and other government-backed currencies, or could infringe on consumers’ privacy.
Essentially, there is no limit on the type and the amount of data Libra will gather, and absolutely no guarantee on privacy. Facebook’s business model is based on how much it knows about you. As Libra itself is based on the permissioned blockchain, it means Facebook has full censorship power backed up by money that people, especially the unbanked, are going to need, said Jean Phillipe Beaudet, Director and CTO of ZeU Crypto network for the Financial Fox.
Such concerns among experts regarding the Libra stable coin are predominantly rooted in the market dominance of its parent company, Facebook, and the latter’s controversial past regarding data handling. With that in mind, introducing Libra, a payment system powered by Facebook, raises serious political power and consumer privacy concerns.
Jean Philippe Beaudet, director of ZeU, argued that although cryptocurrencies are always seen as a decentralisation tool that will help people gain more freedom, they can also become the most effective control tool ever made, as this is smart money needed by everyone. “We are now at the point where we have to balance these requirements of being a bit regulated and not enabling the governments to control their populations. That is potentially going to be a great challenge and Libra is not helping on that front. I believe it’s just creating a scarier monopoly”, added Jean Philippe Beaudet for the Financial Fox.
Adoption of Libra in different countries
Libra’s main objective — to bank the unbanked in developing countries — seems to be running into obstacles already.
It appears that Libra’s mission could be undermined as some of the developing economies such as India, Libra’s largest potential market, seems to have adopted a hostile approach towards cryptocurrencies. Earlier in 2019, India introduced a bill on Banning Cryptocurrencies and Regulation of Official Digital Currency, proposing a 10-year-long prison term for people who “mine, generate, hold, sell, transfer, dispose, issue or deal in cryptocurrencies”, ultimately preventing Libra and any other innovative crypto-technology project from entering the Indian market.
Ajeet Kurana, Indian entrepreneur and former CEO of Zebpay India shares his hopes in the interview with Director of Financial Fox Stefania Barbaglio, in regards to Libra’s efforts in India: “If in such an environment, Facebook’s Libra succeeds in leading the way against the Indian government or in fact any such government hesitant towards cryptocurrencies, showing that the unbanked are truly the marginalised community in question, that would open the doors to all the other cryptocurrencies and digital assets to enter the Indian market.”
The future of Libra in China, the other leading emerging economy, does not seem much brighter. The media outlets Facebook and WhatsApp are already banned in China, the most restrictive country when it comes to ICO’s, prompting social media consumers to use WeChat, a similar app that allows the options of payment transfers and purchasing goods without ever leaving the app.
Jared Tate, founder of DigiByte, believes that “If history is any sort of track record, the Chinese government will opt to do something very similar to Libra, creating their own digital currency”. The central bank of China is reportedly working on its own digital currency to stop Facebook from taking over the market.
Cryptocurrency and Blockchain Ecosystem to expect other players, inspired by Facebook
Charles Hoskinson, CEO of Input-Output Hong Kong, shared in his interview for the Financial Fox his prediction of the Crypto and Blockchain market: “The existence of Facebook in the market will be an invitation to the others to come in as well. It is kind of the next wave and a great competitive pressure to existing players such as Cardanos, Ethereums and Bitcoins to evolve more quickly. Ultimately it’s Darwinian technology and we have to be obsessed with usability, consumer experience and usefulness in order to survive. Facebook has certain advantages which other smaller players don’t.”
However, those advantages don’t seem to be stopping other big companies either. We are possibly expecting to see other big platform providers such as Amazon, Google, and Microsoft entering the Blockchain and Crypto space. Samsung has already announced experiments on developing an Ethereum-based Blockchain , while Nestle announced its new Blockchain initiative to support its supply chain.
The decentralised nature of blockchain technology means that it doesn’t rely on a central point of control. A lack of a single authority makes the system fairer and considerably more secure. The way in which data is recorded onto a blockchain epitomises its most revolutionary quality: decentralisation.
Instead of relying on a central authority to securely transact with other users, blockchain utilises innovative consensus protocols across a network of nodes to validate transactions and record data in a manner that is incorruptible. However, that can’t really be said in the case of Libra, which is supposedly backed up by the pool of securities.
In that respect, Jared Tate, founder of Digibyte, believes that the truly decentralised projects out there really cannot be compared with these fiat currency-backed projects. Jared told Financial Fox that in the case of Libra, there needs to be a differentiation from the regulators’ perspective on how an everyday, transactional stable coin is operated versus a truly decentralised digital asset like Bitcoin or Digibyte. We can’t really compare the two as they don’t function in the same way, considering that the Libra project is pegged to the US dollar, which is subject to inflation.
So far, Facebook doesn’t have a very good record of decentralising things and giving power to the users. It is, like most Silicon Valley companies, the middleman of necessity and in occupying that position, has the enormous control over your privacy, your information and your autonomy. “They like being dictators in that respect”, said Charles Hoskinson, CEO of Input-Output Hong Kong in an interview for the Financial Fox.
That perhaps subjects Facebook’s decentralised technology to even more scrutiny, as calling it decentralised while in essence it is not, makes it even more controversial.
So where does that leave Libra? Ultimately, it is at the forefront of this paradigm shift towards a more developed digital economy of the future. But until further developments are completed and authorities start to warm to the idea of digital money, Libra’s near future depends on its collaboration with the financial sector, social impact organisations, regulators and experts across various industries. This is the way to ensure that a sustainable, secure and trusted framework underpins Libra’s system, allowing it to deliver a leap forward for economic empowerment on a global scale by ultimately encouraging the development of digital economy, as has been promised by Facebook.