By: Anurag Lal, President and CEO of Infinite Convergence
In June of 2019, Facebook announced plans to launch a digital currency called Libra, a stable coin linked to the value of other currencies like the U.S. dollar and the Euro. As part of this initiative, Facebook developed Calibra, a cryptocurrency wallet for sending digital currency that will be built into Facebook Messenger and WhatsApp. Reaction to the announcement included a firestorm of regulatory questions, data privacy and trust concerns from financial regulators, lawmakers and data protection and privacy enforcement authorities.
Facebook’s plans to debut Libra in the first half of 2020 raised concerns among financial regulators that the potential widespread adoption of the digital currency by the company’s 2.4 billion users could undermine the global financial system. In testimony before the U.S. House of Representatives Financial Services Committee, Federal Reserve Chairman Jerome Powell said “Libra raises many serious concerns regarding privacy, money laundering, consumer protection and financial stability.” The U.S. Treasury Department went a step further highlighting the issue of national security with Secretary Steven Mnuchin saying “the Treasury Department has serious concerns that Libra could be misused by money launderers and terrorist financiers.”
Concerns about Libra even prompted both Germany and France to block the digital currency. According to Reuters a joint statement issued by the countries said, “no private entity can claim monetary power, which is inherent to the sovereignty of nations.”
Much of the opposition to Libra is the result of repercussions from data leaks like Cambridge Analytica and Facebook’s failure to address privacy concerns. There also exists a huge trust deficit on Facebooks ability to responsibility manage consumer data and information. U.S. lawmakers have been especially critical of this Facebook initiative. For example, California Representative Maxine Waters and Ohio Senator Sherrod Brown both expressed concerns about entrusting sensitive financial information with a company that has had as large of security failures as Facebook has.
Data privacy regulators have expressed concern as well. FTC Commissioner Rohit Chopra, U.K. Information Commissioner Elizabeth Denham, Canadian Privacy Commissioner Daniel Therrien, and European Data Protection Supervisor Giovanni Buttarelli also weighed in on Libra, issuing a joint statement that expressed their “shared concerns about the privacy risks posed by the Libra digital currency and infrastructure.” Regulators who signed the statement also want more specifics on the initiative’s data privacy measures asking, “how can global data protection and privacy enforcement authorities be confident that the Libra Network has robust measures to protect the personal information of network users?” and “how will the Libra Network incorporate privacy by design principles in the development of its infrastructure?”
Regulators, lawmakers and data privacy advocates are right to be concerned about Facebook’s Libra initiative. The lack of regulation around digital currencies like Libra as well as privacy and security concerns should put a pause on this initiative. The risk to consumers’ data privacy and personal information seems too great to give Facebook any entrée into managing a digital currency.