In this article, we’re going to take a look at how exactly can Libra be a threat to the safety of its users.
Facebook unveiled its own cryptocurrency just some months ago. It’s called Libra and it promises to “democratise” the currency market. With such promising claims and the overall hype surrounding cryptocurrencies, it’s hard to not be enthusiastic about Libra.
However, in light of recent developments associated with Facebook’s misuse of its customers’ personal information, there are some rising concerns on the part of politicians, as well as financial analysts.
Libra: corporate origins
When comparing Libra to other cryptocurrencies like bitcoin, there are some fundamental differences. Bitcoin, even though it has caused a total meltdown on the currency markets with its ridiculous price spikes and drops, it still is a decentralised technology managed by the user community.
When it comes to Libra, though, the currency has a centralised source closely resembling the government. There might be 21 other big members in the Libra Association like Spotify but everyone knows Facebook holds the main initiative power.
With Facebook on the governing heights, there’s a real possibility of monopolistic management. When monopolies emerge on any market, they hold the power to dictate their own rules and hardly ever take into account the customers’ desires. At this point, the businesses are more focused on garnering as much wealth, while their customers don’t have many other alternatives.
That’s what’s scary about Libra. Facebook’s monthly active users in the first quarter of 2019 have reached 2.375 billion. With such a vast customer base, Facebook’s Libra will be one of the biggest currencies there is, not just cryptocurrencies. This means that the monopoly incentives will be ever more prevalent for the company.
Facebook: a threat to personal credentials
Since we’re talking about one of the biggest customer bases, it’s fair to mention another threat associated with Libra – Facebook’s misuse of personal information.
2018 was a tumultuous year for Facebook. One of the major events that year was Cambridge Analytica: a former employee at Cambridge Analytica has revealed that the company was improperly obtaining Facebook’s user data.
The company has been characterised as a ‘voter-profiling’ entity that identified the voting patterns of US citizens and reportedly affected their behaviour. According to unofficial sources, over 87 million Facebook users’ data had been leaked.
In light of such mishandling, Facebook’s users are always under threat of another infringement of their privacy. And with Libra coming out soon, their financial stability is getting compromised as well.
According to Naeem Aslam, chief market analyst at Think Markets,
“Libra is going to be the first major cryptocurrency … introduced by one major corporate or enterprise.”
Almost 3 billion users will, in theory, be included in the system and every single one of them will be under the financial threat.
Libra: terrorism and money laundering
Another threat is associated with Libra’s crypto-nature. However, to be perfectly honest, this shortcoming is a common issue with all cryptocurrencies. The thing is, they’re anonymous, which means there’s virtually no way of tracing transaction origins.
The regulators have voiced major concerns about the issues of the cryptocurrencies being used for money laundering and funding of terrorism. According to such politicians, with such a vast reach and no regulatory limitations, Libra might be a perfect currency for such uses.
However, not to sound overly pessimistic and outright denouncing the crypto-technology, let’s see some of the Libra’s upsides.
‘Democratised’ markets to Facebook
One of the main promises of the Libra Association was that it would ‘democratise’ the currency markets and serve the ‘underserved’. According to the Business Insider, there are over 2 billion ‘unbanked’ people with no bank accounts who receive their income in cash. Not surprisingly, the majority of them come from developing countries.
With Libra and Facebook’s 2.5 billion users, this issue might be overcome in no time. To use the currency, it’s only going to take some sort of a device connected to the internet.
Besides, the amount of currency on the market will depend solely on supply and demand chains. This way, with governmental issues and political motives underpinning the inflation rates, the currency will be much fairer and reflecting the market conditions.
This is particularly important for other political issues such as oil prices. Nowadays, oil prices are established in USD and thus, the US retains its dominance not only economy-wise but also in politics. However, when Libra hits the market and becomes a popular currency, the incentive to transform pricing patterns from the USD to cryptocurrencies will increase.
This way, there will be far less room for political manipulations and trade wars that now affect our every-day lives.