Facebook’s Libra Cryptocurrency: A Threat to Privacy and Competition

Andrea Image
ByAndrea
June 25,2019

Libra, Facebook’s new cryptocurrency, is awaiting a hearing before the U.S. Senate Committee on Banking, Housing, and Urban Affairs. The July 16 meeting will be held at 10 a.m. EST, and as of yet, no information about witnesses has been released. The hearing will be broadcast to the public.

The goal is to examine “Facebook’s Proposed Digital Currency and Data Privacy Considerations.” Libra’s features, business plan, and potential risks will undergo close scrutiny at the hands of the Congress members, and any further work on Libra will likely be delayed.

Facebook characterized Libra as a “global currency and financial infrastructure,” a digital asset powered by Facebook’s new version of blockchain. Facebook claims its ambition with Libra comes down to reaching 1.7 billion people worldwide who still don’t have access to a bank account.

Still, the Banking Committee has met Facebook’s seemingly altruistic plan with caution. In an open letter they published last month, the Committee demanded answers about Facebook’s work on Libra: how it works, and whether Facebook sought any input from market watchdogs and regulators before putting it in motion.

Even before Facebook went public with its vision for a global cryptocurrency, it sparked the interest of the Congress with its social media monopoly. Together with Google, Facebook controls 82% of the digital advertising market. This monopolization has triggered an antitrust investigation that will dig deep into Facebook’s Google’s, and Amazon’s anti-competitive behavior. 

Currently, banks and financial institutions have limited access to personal information and data. If Facebook, a company which holds more personal data than most governments, establishes Libra, it will significantly diminish other organizations’ chances at the consumer payment market. Facebook’s Libra project threatens to increase its monopolistic efforts to the financial market exponentially, in keeping with Facebook’s monopolistic business style.

Still, killing off payment market competitors is not the officials’ only concern. Privacy has become a burning issue after a series of data theft and data leakage controversies, and the Cambridge Analytica scandal. Its insight into consumer purchasing habits and patterns is unprecedented; if Facebook successfully mints its own coin, the public would get a chance to witness the greatest anti-competitive trust case in history.

Following today’s news on U.S. Senate Committee on Banking, Housing, and Urban Affairs hearing, committee member and 2020 presidential candidate Sen. Elizabeth Warren tweeted: “Facebook has too much power and a terrible track record when it comes to protecting our private information. We need to hold them accountable—not give them the chance to access even more user data. #BreakUpBigTech.”

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After unveiling their new cryptocurrency project on Tuesday, Facebook is experiencing pushback from both U.S. and European lawmakers. The launch is facing heavy scrutiny and some of the officials calling for it to be put on indefinite hold. Facebook has recently announced the release of Libra, a blockchain project that will involve a consortium of big companies such as Visa, MasterCard, PayPal, Uber, and Spotify. The currency is meant to enable cheap and easy payments all around the world, and it will be marketed primarily to developing countries. As soon as the tech giant published its white paper on Libra, politicians were quick to voice their concerns. Maxine Waters, the Democratic congresswoman and House Financial Services Committee Chairwoman gave a press statement that was picked up by multiple news outlets: “With the announcement that it plans to create a cryptocurrency, Facebook is continuing its unchecked expansion and extending its reach into the lives of its users."She continued with a demand for Facebook to put project Libra on hold: "Given the company's troubled past, I am requesting that Facebook agree to a moratorium on any movement forward on developing a cryptocurrency until Congress and regulators have the opportunity to examine these issues and take action.”After the statement, a Facebook spokesperson was asked for comment. "We look forward to responding to lawmakers' questions as this process moves forward," they stated, implying that the company doesn’t plan to cease the development. Given Facebook’s history of scandal and the antitrust investigation they are currently being subjected to, both Republican and Democratic officials are reluctant to give the company free reign and allow them even more power to control the market. In Europe, government representatives are similarly opposed to the idea. “It can’t and it must not happen,” the French Finance Minister, Bruno Le Maire, claimed in an interview for Bloomberg. A German member of the European Parliament also stated that Facebook is at risk of becoming a “shadow bank” and that they “must not be allowed to operate in a regulatory nirvana when introducing virtual currencies.”U.S. Senator Sherrod Brown is also concerned about Facebook becoming too big and too powerful to control. He stated: “We cannot allow Facebook to run a risky new cryptocurrency out of a Swiss bank account without oversight. I'm calling on our financial watchdogs to scrutinize this closely to ensure users are protected." The social media company has had numerous issues in the past. Several privacy concerns were raised, the latest one related to a huge data leak that leaked millions of user records on cloud servers. With this new cryptocurrency, there are many concerns that Facebook will exploit users’ data without protecting their privacy.
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