Previous mistakes made by the American company should prompt financial regulators to closely monitor the launch of the cryptocurrency Libra.
"Your money is of interest to me," read the blunt advertisement by a large French bank. Facebook is not as direct, but the intention is the same. After worrying about whom we were dating, where we were traveling, what we liked to eat or whom we were voting for, the social network now seeks to keep an eye on our wallets. Mark Zuckerberg's company has just announced the 2020 launch of a cryptocurrency: Libra. Facebook’s interest in our money represents a potential upheaval in the field of financial transactions, which should arouse our vigilance.
Silicon Valley is second to none in presenting its initiatives under the guise of modernism and practicality. Thanks to an electronic wallet, Libra is supposed to allow not only the transfer of money in a quick, simple, secure and cost-effective way but the purchase of all kinds of goods and services.
The company has taken care to distance itself from the disputed and speculative model of Bitcoin, whose value is not based on any tangible asset. Libra is presented as a "stable currency," whose price will be determined using a basket of currencies (dollars, euros, yen, pounds sterling). In this respect, Facebook’s initiative does not question, at least initially, the monetary sovereignty vested in countries, but it promises to radically challenge the hegemony of traditional banks in financial transactions.
2.7 Billion Users
The problem is that Facebook isn’t just any company. With 2.7 billion users, as well as 1 billion users of Instagram and its satellite messaging apps, Messenger and WhatsApp, Zuckerberg's company has firepower that is matched only by its disastrous reputation in terms of trustworthiness. The Cambridge Analytica scandal revealed the social network’s extreme negligence in protecting the data of its users. Additionally, it has proven to be incapable of truly controlling the hate speech and smear campaigns circulating on the site with a dizzying viral quality.
Although the impact that these serious failing have had on Facebook’s revenue has been limited for now, they justify extreme caution. There is now a bigger challenge than merely protecting personal data. Ten years after the financial crisis of 2008, banks are being painstakingly regulated thanks to stricter legislation. We must think twice before allowing Facebook to become a player that is capable, by virtue of its size, of introducing a new way of destabilizing the system.
Although Libra is only a transactional tool for now, there is no guarantee that Zuckerberg will stop there. As 98% of Facebook’s revenue comes from advertising, the company has a clear need to diversify its business model. This my eventually lead to developing increasingly sophisticated financial products or even issuing money.
Each time Zuckerberg has been held accountable for his company’s abuses, he has made several excuses. It might be time to stop taking him at his word. This time, financial regulators must take the lead by strictly regulating a company that has played God more often than not.