- No, Facebook should not be allowed to have its own currency.
- The company can’t be trusted with the power it has, no sane regulator should give it more.
- As one Senator said, Facebook has allowed "flagrant displays of bull—-‘ on its platform — how can we trust that it will not allow ‘flagrant displays of bull—-‘ in its financial transactions?
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The United States government shouldn’t even be entertaining the idea that Facebook be allowed to create its own currency and financial services arm — Libra and Calibra. The company has done nothing but demonstrate that it cannot be trusted with global financial transactions.
In June Facebook announced that it — along with companies like Spotify and Visa — would create a convertible virtual currency (CVC) called Libra to be used on its platform. Facebook would also create a financial services arm called Calibra which would initially offer a digital wallet for Libra and then expand to other banking services like savings and loans. These entities are to be headquartered in Switzerland through a non-profit called the Libra Association.
This matter has been a subject in Congressional hearings for a couple of weeks now. But that should all just be a formality — an opportunity for Facebook to make its case to the public, after which a bipartisan group of legislators, the US Treasury Secretary, the Chairman of the Federal Reserve, and every other regulator who has examined this issue can come together and give Facebook the answer it deserves: No.
Because of Facebook’s size and reach this currency would instantly become "systemic" as they say in the world of banking. That means the platform will immediately have to grapple with all the darkest corners of the financial system, like terrorist financing and money laundering. These are difficult for even developed, sovereign nations.
For smaller countries where the currency is weak and limited, there are even more obvious challenges because of Facebook’s size. Citizens might turn so much of their currency into Libra that it forces their currency down, for example.
"Monetary policy might end up being set for areas all over the world by a board of largely Western companies located in California with a pot of hard currency-denominated assets in a potentially unregulated Swiss reserve, rather than by democratically accountable sovereign governments," wrote Matt Stoller, a researcher at anti-monopoly thinktank The Open Markets Institute.
On Tuesday Facebook’s Head of Calibra, David Marcus, testified before the Senate Banking Committee to assuage Washington’s fears about what Silicon Valley could do with all this power. He assured Senators that Libra would comply with anti-money laundering statutes, that it would be regulated by Swiss entities, and that the Calibra wallet would comply with the Bank Secrecy Act.
None of that matters — none of Marcus’ promises or clarifications or assurances mean anything. Facebook’s word is no good. Opposition to Libra has nothing to do with innovation, this is about working with people you can trust.
And we know we can’t trust Facebook, a few examples:
- There’s that time Facebook sold third party platforms access to minors’ data.
- That time it leaked four million users’ data.
- There are the teens who are suing the company for profiting from data used to sell them into sex slavery.
- There’s the horrible way Facebook and its contractors treat the people who are paid to patrol violence and misconduct on the platform.
- And of course, even though Facebook knew that Russian agents had used its platform to spread misinformation during the 2016 election in 2016, it did not admit to the depth and breadth of the problem until 2017.
I wouldn’t let Facebook water my plants, let alone monitor my banking transactions.
‘Flagrant displays of bull—-‘
During the hearing Marcus kept trying to point out that other companies were also involved in this project. Yes, they gave Facebook $10 million to start the project, but Calibra itself will be wholly owned by Facebook and most of this activity — like almost all social media activity — will take place on Facebook, Instagram or Whatsapp.
And if other companies care so much about Libra, why aren’t they in Washington taking the heat from just about everyone in town, Democrat or Republican?
"Libra raises many serious concerns, privacy, money laundering, consumer protection and financial stability," Federal Reserve Chairman Jerome Powell said in testimony before the House Banking Committee last week.
And in a rare, almost freakish show of civility between a Trump appointee and Democratic leadership, Congresswoman Maxine Waters (D-CA), the chair of the committee, looked at him with something like satisfaction.
The bipartisan lovefest went along the same lines in the Senate on Tuesday as well. They brought up Libra and Calibra’s potential to put national security at risk:
"This is a new day and age when it comes… carrying around a briefcase of cash, transnational criminals and terrorists don’t do that anymore," Senator Cathrine Cortez-Masto (D-NV) told Marcus. "What you’re creating right now is an opportunity for them to engage in more money laundering and criminal activity, so know that. To say you’re going to comply with AML (anti-money laundering) is one thing, I need to see the specifics."
And they discussed Facebook’s track record as a platform for bad actors:
"60% of your users say they get news from Facebook as their primary source," said Senator John Kennedy (R-TX). "Isn’t it true, and I really want your opinion, that Facebook has chosen to advance a set of values in which truthful reporting has been displaced by flagrant displays of bulls—… Facebook now wants to control the money supply. What could possibly go wrong?"
Marcus tried to tell Senator Kennedy that Facebook acknowledges that it worked too slowly to counter bad actors in the past, but that was really all he could say and it wasn’t good enough. When transactions are done in a split second there is no time for a company to be slow, not even once.
And Marcus’ answers don’t actually matter anyway. As Senator Martha McSally (R-AZ) pointed out, Facebook has told the world that it would change its behavior before and it has violated those promises time and time again.
So to Marcus’ statements about Libra and Calibra’s data sharing constraints, McSally said: "How do we know this isn’t going to change and how do we know you’re actually going to do that based on your track record of failing, violating and deceiving in the past?"
We don’t. So while this has been an interesting exercise — and the bipartisanship in Washington is truly refreshing — no one should be seriously entertaining a Facebook currency. It’s can’t be trusted.
- Facebook’s cryptocurrency plans hit a bipartisan wall of suspicion from US lawmakers: Why should anyone trust Facebook?
- Senator Sherrod Brown rips into Facebook, comparing the social network to a dangerous ‘toddler’ that keeps committing arson
- Mark Cuban thinks Facebook’s cryptocurrency Libra is ‘a big mistake’