When Mark Zuckerberg said nearly 10 years ago that “Facebook is more like a government than a traditional company,” who thought it meant that one day the giant corporation would create its own money? But, it’s happening. Facebook announced Tuesday that sometime early next year it plans to launch a cryptocurrency called Libra. The digital cash will use encryption technology to make it secure.
There’s a certain irony in the announcement coming on the heels of Facebook co-founder Chris Hughes’ assertion in a recent New York Times article that Facebook is too big. But the Libra project has been in the works for months. Other tech companies such as Apple and China-based giant Tencent, which owns the WeChat app used by more than 1 billion people daily, have already developed third-party payment capabilities, but whereas those apps send money using existing currency — dollars or yuan, for instance — Facebook plans to develop its own currency.
The news about Libra brings to mind Facebook’s past problems protecting its users from unscrupulous data miners. There’s understandable fear that Libra users could similarly become victims of schemes to capture their personal data. To prevent that, Facebook is setting up a separate company, Calibra, that it says will keep Libra users’ financial information and social network information separate and safe.
Facebook says Calibra will be regulated, but it’s unclear by whom and to what extent. That needs to be cleared up for consumers to have confidence in this new digital currency. Calibra apparently won’t answer to the same agencies that regulate banks and other financial institutions. Federal Reserve Board chairman Jerome Powell said Facebook had consulted with the Fed about Libra, but it does not have “plenary authority” over cryptocurrencies.
Matt Stoller, a fellow at the Open Markets Institute, told the New York Times that without regulation similar to banking rules Libra could fall victim to money laundering, terrorist financing, tax avoidance and counterfeiting. He said without any prohibition against it, Calibra might for a fee share information about a person’s spending habits or account balance with retailers trolling for customers.