I don’t trust those guys.
But I have to admit that Libra sounded like a pretty good idea when the giant social network introduced it to the world. Think of Libra as a poor man’s Bitcoin — electronic money for low-income people who’ve been frozen out of the global banking system.
Unlike Bitcoin, this digital currency will be backed by traditional assets, such as the US dollar, so its value won’t bounce around from day to day.
Anyone with a smartphone or an Internet-connected computer will be able to make instant purchases with Libra, or use it to send cash around the world for only a tiny transaction fee.
Libra won’t be owned by Facebook itself, but by a non-profit organization based in Switzerland and backed by other big corporate names, including eBay, Mastercard, and PayPal. And Facebook vows that it has no intention of collecting data from users’ financial transactions, in a bid to profit from even more of our personal data that it already has.
I’d like to believe Facebook’s privacy pledge; five or six years ago I probably would have, but after countless abuses of trust, I’ve grown cynical.
Still, it’s unlikely that Facebook’s giant partners would stand idle if the social network tried to abuse the privacy of Libra users. They’d wind up in federal court right, beside Mark Zuckerberg.
Besides, Facebook can make a mint off of Libra even if the company keeps its no-snooping pledge. Offering an efficient way to buy things online will keep millions of Facebook users logged in even longer, looking at those lucrative ads and sharing more of their valuable personal data the old-fashioned way. So it’s possible Facebook is on the level this time.
But the company isn’t too worried about winning over people like me, middle-class Americans with jobs and bank accounts. We don’t need Libra; for us, traditional US dollars work just fine.
Instead, “Libra will provide the most immediate value to consumers with limited or no access to financial services,” said a statement from the Libra Association.
That’s a target-rich environment; Libra estimates there are 1.7 billion people worldwide without access to a bank.
“If you’re living in the Congo, you’re more likely to have a Facebook account than a bank account,” said Alex Tapscott, cofounder of the Blockchain Research Institute in Toronto.
Even so, Africa and South Asia are among the last remaining places on earth with large numbers of people unconnected to the Net. With Libra, Facebook becomes their social network and their bank.
There are domestic opportunities for Libra, as well. About 14 million Americans lack a bank account, according to 2017 data from the Federal Deposit Insurance Corp. Another 49 million Americans are “underbanked.”
These are people who have accounts but still do stuff like paying their bills at a convenience store, because it’s too much hassle to mail a check. That’s 63 million people who might welcome a fast, cheap way to move money around.
And with Libra they wouldn’t need a bank account — just a smartphone, and someplace to top off their Libra account with US dollars.
Libra did not provide details on how the accounts would work, but my guess it will be like those vending machines for mobile phones where you can add minutes to your account by inserting a few bucks.
Libra will also target the millions of immigrants in the United States who send money home — $148 billion in 2017 alone. Much of it goes through traditional money-transfer companies such as Western Union, which charge substantial fees. But because it sidesteps the global banking network, a cryptocurrency-based service like Libra could charge little or nothing for the same service.
Indeed, a similar crypto-based payment service, called Circle and based in Boston, has been offering free international money transfers since 2017. But Circle is a lesser-known startup that hasn’t gained much traction with consumers, while Facebook is one of the best-known brands on earth.
Still, Circle founder Jeremy Allaire figures that Facebook’s embrace of cryptocurrency is good news for his company. In an e-mail, Allaire said Libra “has the potential to help millions of more people recognize the way crypto and blockchain technologies can remake the global economic order for the better.”
The idea that Facebook might “remake the global economic order” might thrill Allaire; it appalls the central bankers of Europe. The finance minister of France and the governor of the Bank of England are calling for regulators to take a hard look at Libra before it’s set loose upon the world.
Meanwhile, the Federal Trade Commission is investigating Facebook’s failure to protect the privacy of its users and is expected to levy a multi-billion-dollar fine.
At the same time, Massachusetts Democratic US Senator Elizabeth Warren has made an antitrust breakup of Facebook a key plank of her campaign for the presidency.
And that’s the biggest challenge facing Libra, a clever idea that would probably have met with a much warmer reception if it had been launched by Walmart or McDonald’s or just about anybody other than Facebook. Nobody trusts these guys.