Unlike the decentralized bitcoin, the new cryptocurrency announced Tuesday by Facebook will be governed by a select group of people based in Switzerland.
Breitbart News noted Facebook is establishing a non-profit Libra Association comprised of companies investing in the project, including Visa, Mastercard, PayPal, Uber, Stripe and Booking.com.
Facebook said it chose Switzerland because the country “has a history of global neutrality and openness to blockchain technology, and the association strives to be a neutral, international institution, hence the choice to be registered there.”
Facebook’s white paper on the project said the Libra Association “also serves as the entity through which the Libra Reserve is managed, and hence the stability and growth of the Libra economy are achieved.”
“The association is the only party able to create (mint) and destroy (burn) Libra. Coins are only minted when authorized resellers have purchased those coins from the association with fiat assets to fully back the new coins.”
Breitbart pointed out that in contrast, bitcoin’s decentralized system means that no governing body can choose to increase or decrease the supply of the currency. And no bank can prevent an individual from owning, sending or receiving bitcoins.
‘Pay rent as easily as buying coffee’
Dubbed Libra, the cryptocurrency is set to launch in early 2020 in a dozen countries.
Facebook’s 2.4 billion monthly users will be able to change dollars and other international currencies into its new digital coins, which can then be used on the internet.
“Success will mean that a person working abroad has a fast and simple way to send money to family back home, and a college student can pay their rent as easily as they can buy a coffee,” states Facebook in its documentation of Libra.
But amid all the benefits is a great cost, some contend. Facebook’s move is a “dangerous” power grab that poses threats even greater than the privacy concerns that already have been raised, contends Phil Chen, decentralized chief officer for the Taiwanese mobile phone manufacturer HTC.
“If you’re concerned with Facebook knowing too much or having too much access to your private data or social graph, the [Libra] will give Facebook even more direct access to your financial information,” he told the Sun newspaper of London. “It’s not just access to the information of your transactions, it’s direct access to your wealth and capital.
Chen said the global currency is the “most invasive and dangerous form of surveillance they have devised thus far.”
He predicts it will become a major focus of the upcoming antitrust investigations of Facebook by the federal government.
“If this is launched and adopted worldwide, we’re bound to see Facebook as the top 10 biggest companies for the next 100 years that have complete ownership of the customer and their data from their social graph to every transaction recorded through Facebook, WhatsApp and Instagram,” Chen told the London paper, referring to two of the major digital media companies owned by Facebook.
“This project is the antithesis of bitcoin and is another step towards total control of data and users.
Cryptocurrencies, such as bitcoin, employ encryption techniques to regulate the generation of units of currency and verify the transfer of funds. Decentralized, they operating independently of central banks.
Facebook argues that a users’ identity and Facebook data will not be mingled with any Libra payments. The company is establishing a subsidiary called Calibra that handles the currency transactions so they can’t be used for ad targeting.
The members of the Libra Association, which so far is made up of 28 companies that each have invested a minimum of about $10 million, will earn interest on the money that users hold in reserve.
One of the founding members, the British communications conglomerate Vodaphone, envisions a wide range of innovative financial services being developed through Libra’s open-source platform.
“This has the potential to be truly transformative and will benefit those who have never used, or are struggling to access, financial services around the world,” said Stefano Parisse, group director of product and services at Vodafone Group.
As easy as sending a photo
In April, Facebook CEO Mark Zuckerberg met with the governor of the Bank of England, Mark Carney, to discuss the currency proposal, reported the BBC.
Zuckerberg also has met with U.S. Treasury officials and money-transfer firms, including Western Union.
“Payments is one of the areas where we have an opportunity to make it a lot easier,” Zuckerberg told Facebook’s developer conference in April. “I believe it should be as easy to send money to someone as it is to send a photo.”
Facebook will peg the currency’s value to a basket of established currencies, including the U.S. dollar, the euro and the Japanese yen, according to the Guardian.
The paper said Facebook will face regulatory issues, since the social media platform is not regulated in the same way banks and the cryptocurrency industry are.
However, Facebook has a poor track record with regard to data privacy and protection. The company admitted that data of up to 87 million Facebook users had been used by the political opposition group Cambridge Analytica to target ads for Donald Trump in the 2016 presidential election.
And in May, the U.S. Senate Committee on Banking wrote an open letter to Zuckerberg with many questions. The lawmakers want the CEO to explain how the currency would work, how the data would be secured and what consumer protections would be offered.