Facebook’s Libra sparks privacy and security concerns
On Tuesday, Facebook unveiled plans of launching its own digital currency, Libra, in the first half of 2020. Facebook’s stablecoin will let users shop and send money overseas with almost zero transaction fees.
Facebook has united forces with some of the major names in payment and e-services including Mastercard, PayPal, Uber, Visa, Spotify, eBay, and Vodafone, to form the 28-members Libra Association, based in Geneva. Facebook hopes to have. It is reported they expect to have 100 members by Libra’s launch, showing the ambition underlying its plans. The Libra currency will be stored on the e-wallet Calibra, which is being developed by Facebook. According to the company, the Calibra wallet will be available in Messenger, WhatsApp and as a standalone app.
In less than 24 hours, the project already raised great concerns as Libra is poised to become a global currency that could potentially challenge major fiat currencies such as the US dollar, as well as take down traditional financial institutions.
Having a centralised tech company like Facebook orchestrating the launch and system of a cryptocurrency goes against one of the core principles of digital currencies advocates: decentralisation. With 2.7 billion users, Facebook has constantly been a target for hackers and malicious actors, because of the value of its users’ data — it can become even worse holding large amounts of money.
Whilst a more detailed plan of how Libra is going to work, it is clear that it will have a significant impact over the current financial system, perhaps even become a major player, given the large influence of Facebook.
Questions over privacy of financial information have emerged to put into question Facebook’s credibility of managing a digital currency. Recalling the Cambridge Analytica scandal, which saw the hijack of 87 million users data, just a year ago, Facebook does not have a positive track record of securing users’ data and privacy — so quite understandably, there have been doubts about Zuckerberg’s firm dealing with people’s money. Facebook has constantly been a target for hackers and malicious actors.
“It’s difficult for me to see anyone who cares about privacy actually adopting this new offering, particularly given Facebook’s laughable record on respecting their users’ privacy choices,” cybersecurity expert Brian Krebs said to CNBC.
The lack of legal protection for users is another of the main worries about the Libra project. The sector of digital currencies is at the moment largely unregulated, justifying the concerns of having the tech giant Facebook entering the competition. So far, in the cryptocurrency realm, investors across the world have lost hundreds of millions of dollars through price volatility, crypto-exchange hacks and illegitimate projects. In 2018 alone, $1.7 billion in cryptocurrency was stolen through hacking.
The market has also faced money-laundering and terrorist-financing allegations. In light of these allegations, Facebook said that the Calibra system plans to conduct compliance checks on customers who want to sign up, using verification and anti-fraud processes that are common among banks.
According to Kevin Weil, who runs product for the Libra initiative, the project gives a chance for regulators around the world to bring their attention to cryptocurrencies and start creating mechanisms of regulating the system: “It gives us a basis to go and have productive conversations with regulators around the world,” he told Reuters. “We’re eager to do that.”
Cryptocurrency experts took to social media to express their concerns over what Facebook’s entry to the crypto space could mean.
“If you’re concerned with Facebook knowing too much or having too much access to your private data, Libra will give Facebook even more direct access to your financial information,” said Phil Chen, a cryptocurrency expert who pioneered HTC’s first blockchain smartphone to the Independent.
“It’s not just access to the information of your transactions, it’s direct access to your wealth and capital. If the top-line question about Facebook and antitrust is about whether to break it up and spin off the likes of WhatsApp and Instagram — well Libra is the most invasive and dangerous form of surveillance they have designed thus far. This will easily become the most dangerous antitrust case in history.”
The Libra project has proved to be worrying for lawmakers who were quick to reprimand the cryptocurrency. The project is suffering backlash from regulators and lawmakers in the US and Europe with urges for the project to be delayed or even paused.
“Given the company’s troubled past, I am requesting that Facebook agree to a moratorium on any movement forward on developing a crypto-currency until Congress and regulators have the opportunity to examine these issues and take action,” said US Democratic congresswoman Maxine Waters.
The French Finance Minister, Bruno Le Marie, has said that this new cryptocurrency cannot operate as a sovereign currency. The minister also stated that the Libra currency should be a matter of discussion on the upcoming G7 meeting with central bankers in July.
On the next FinancialFox, crypto expert Stefania Barbaglio will interview On Yavin, CEO and Founder of Coin Intelligence. Coin Intelligence conducts data research and data analysis for the crypto economy. On will be sharing insights about the latest developments of Facebook’s Libra and its impact on the crypto market.
Don’t miss our next episode live tomorrow!