Last month Facebook announced its new digital currency Libra, something similar to Bitcoin, for use around the world. The currency, however, is still in the limited rollout and is slated to public launch in 2020. But, the announcement has apparently opened a pandora box, as authorities appear to be quite concerning about the aftermath of Libra in the market.
In the light of the privacy issues of Facebook, besides the antitrust amongst users, lawmakers and global regulators are now demanding the project Libra to be discontinued.
Jerome Powell, the Federal Reserve Chair recently stated that the move by Facebook poses a lot of serious concerns to global financial stability. This is in addition to issues like consumer protection, money laundering as well as user privacy.
It is similar to the concerns raised by regulators from Asia and Europe. One of the biggest concerns is that Libra will be run by Facebook and its partners and will be further regulated by a non-profit association called Libra Association, which has its headquarters in Geneva. This wold allows the blockchain-based currency to operate a global financial network which lies outside the regulations and frameworks set by the central banks.
Additionally, since all transaction records are maintained in an encrypted ledger, the Libra Blockchain will have a permanent record of all transactions done by people, which makes us question the privacy of these individuals.
Facebook Libra: Other concerns
That’s not all the authorities are concerned about. There are additional issues in places including the clarity on the strategy to tackle countries where Facebook does not plan to operate the currency. For example, Facebook does not have any business in China, which has questioned the effects of the global systemic risks and spillover of Libra. The currency could give rise to instability in a lot of developing countries if people switch to Libra from their locally used currency.
Chris Hughes, the co-founder of Facebook, also reportedly said that this currency could potentially interrupt and incapacitate countries around the world by empowering people to stop using their local currencies and use one that would lead to a decentralised form of governance.
Facebook Libra: The Pros
Being in the nascent stage, indeed, Facebook Libra has got a lot many questions to answer. But, it also offers a lot more benefits to the system. Libra would act as a means of money transfer across different borders without attracting extra fees. Libra could also be useful to those who want to start their online business but do not have credit cards or bank accounts. Moreover, Facebook could also use it to attract an increased number of people to purchase products or services from the different ads that are available on the platform.