Facebook’s New Competition: The U.S. Dollar

People may even welcome that: In the global banking industry, Facebook has probably found the one group of corporations less liked and less trusted than itself. But if you think Facebook is powerful now, just wait until it’s, essentially, the global federal reserve, overseeing a global currency over which it has not just monetary control but a visible, minable record of every transaction made

di Max Read

At least it’s not “GlobalCoin.” For months now, rumors, leaks, and speculation have held that Facebook’s newly developed cryptocurrency — the entrance of the most powerful private surveillance apparatus on the planet into a sector created by and for obsessively secretive cypherpunk libertarian cranks — would be called “GlobalCoin.” It felt a bit on the nose. (Was NewWorldOrderCoin already taken?) Instead, the coin will be called Libra … a reference to the currency system of history’s most famous conquering empire, Rome. I personally would have gone with “Facebucks.”
Libra, which was finally, officially announced this morning, is expected to launch in 2020 with Calibra, a digital wallet for securely storing the currency that can be used as a stand-alone app or in WhatsApp and Facebook Messenger. Previous reporting has suggested that Indian WhatsApp users will be first to have access to the cryptocurrency, for no- or low-fee money transfers, and Facebook has apparently, and uncharacteristically, been wooing regulators and central bankers around the world to smooth the coin’s landing.

The Libra blockchain — that is, the shared ledger of all transactions made in Libra — will be maintained by a network of nodes, which verify transactions and store the continuously updated record. These nodes will be operated by outside companies (early partners seem to include Mastercard, PayPal, Uber, and Booking.com), each of which will reportedly pay $10 million for the privilege, and the money from these licensing fees, the Information reports, will be used to back Libra with a “basket of currencies and low-risk securities from various countries,” keeping its value stable. How, precisely, users will exchange Libra for physical currency remains to be seen, though the most likely option is that Facebook partners with a cryptocurrency exchange, and the Information reports that there are plans for “physical terminals similar to ATMs.”

Facebook is insistent that Calibra will not share “account information or financial data” to it, or to third parties — but that the wallet will use Facebook data to “comply with the law, secure customers’ accounts, mitigate risk and prevent criminal activity.” What this means in practice is not precisely clear, except that Facebook wants to make sure you’re aware that your Libra account balance will not be used to help target you with ads on its main platform.

The coin itself will be governed by an independent foundation, the Libra Association, consisting of representatives from Facebook, financial institutions, nonprofits, merchants, venture capitalists, and the companies running the nodes. Facebook is already working on creating its own private supreme court, after all; why wouldn’t it want its own private, independent central bank as well? This highly centralized structure is very different from that of “traditional” cryptocurrencies like bitcoin, which spurn centralized authority and allow anyone to set up a node for free. And unlike Libra, whose value will be fixed to the aforementioned basket of currencies and securities, most cryptocurrencies don’t maintain fixed exchange rates — which is exactly what makes crypto such an exciting and volatile speculative market.

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