Will crypto make Facebook too powerful?

Facebook co-founder and CEO Mark Zuckerberg; photo courtesy of Fortune.com

Nowadays, everything is online and our lives rely on technology; it’s how we communicate, conduct business, travel and so much more. In fact, it’s probably hard to remember a day where you’ve not had some interaction with the tech world. As our lives become ever more reliant on online platforms, however, some people fear that tech giants like Facebook and Google are becoming too powerful in our society. This fear became more of a reality on June 18, 2019, when Facebook made the announcement that it is breaking into the cryptocurrency world, ready to exert an influence and control over another source of data. 

If passed by regulators, Facebook’s cryptocurrency, named Libra, will be available on either “a standalone application or its messaging platform.” Similarly, a current messaging platform that is used to make payments is WeChat, which has had a great deal of success in China and is used by most locals, with about one billion monthly users and 900 million on WeChat Pay as of 2019. With Libra, Facebook has the opportunity to obtain the success of an app like WeChat through its online messaging platforms. On the Facebook Messenger app, at the end of 2018, Facebook had 1.3 billion monthly users, as well as 1.5 billion monthly users on its other messaging platform, WhatsApp, at the end of 2017. The difference between WeChat and Facebook will be that the money passing through the app will be Facebook’s proprietary money, while WeChat is moving RMB, dollars, pounds and other fiat money. 

Facebook's newly proposed cryptocurrency, Libra; photo courtesy of Getty Images

Cryptocurrency differs from normal money, since it is all-digital and doesn’t exist in the physical form, which is quite hard to wrap your head around. With Libra, Facebook is basically trying to create a new global currency that can be exchanged completely online. Money that is handled via blockchain transactions is also not overseen by governments or banks, meaning Facebook would get a break from its long history of government intervention it has faced. In order for Facebook to gain this level of trust, given everything it has been through in recent years, the company has surrounded itself with trustworthy people. The Guardian explains that Facebook has attempted to ease people’s concerns by having a subsidiary to “facilitate transactions and an independent association in the neutral Switzerland [to] oversee it.” The currency will also be managed by other finance and technology companies, as well as credit card facilitators such as Visa and Mastercard. 

A Coindesk article points out that this move by Facebook is ultimately a move for more data. The article explains that “this is all about Facebook enriching its reservoirs of data, knowing who you are (for real), what you’re buying, who you’re paying and how much you have.” In a nutshell, Facebook joining the financial world through cryptocurrency adds to the ever-growing strength and scope of the Silicon Valley tech giant.

A breakdown of how Libra would work; graphic courtesy of Financial Times

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