On Tuesday, Facebook shook the tech community when it released the white paper for its new cryptocurrency, Libra. Libra isn’t exactly another mutated version of Bitcoin that vies to overthrow the entire financial world order. Rather, it is “designed from the ground up to be a great medium of exchange” for Facebook’s 2.4 billion users worldwide, according to David Marcus, head of Facebook’s Calibra, a newly formed subsidiary responsible for developing the digital wallet behind Libra.
Upon launch, Facebook members will be able to use Libra for everyday transactions on Facebook Messenger and WhatsApp. Facebook has promised that it will not share or monetize users’ financial data and has formed a supervisory board made up of Visa, Mastercard, Uber, PayPal, Uber, Stripe and Booking.com to ensure business integrity.
“From a branding standpoint, it’s genius. They literally sat down and said, ‘OK. Let’s start with the assumption that nobody trusts us. How would we do this?'” Scott Galloway, a marketing professor at New York University known for his sharp-tongued critiques of influential tech companies, said in the new episode of Pivot, a weekly podcast he co-hosts with Recode journalist Kara Swisher.
Galloway added that the $500 billion global remittance industry, which charges an average transaction fee of seven percent, is overdue for disruption, which creates a perfect market environment for Facebook’s digital coin. “This thing makes all the sense in the world,” he said.
But there is one problem. “It’s from Facebook. And nobody trusts Facebook,” Galloway said.
“It’s not that if people think Facebook is evil, which it may or may not be,” he went on to explain. “Facebook hasn’t shown an ability to think through unintended consequences or prevent bad actors from weaponizing its platform.”
And the greatest danger of Libra is no different than the risks associated with any other products developed by Facebook: its enormous user base.
“If 50 percent of Facebook users all of sudden use this coin, then you potentially have a new reserve currency globally. If you would weaponize a global currency and start monkeying with it, you could have what capitalists fear more than war: a recession—or some sort of a global economic meltdown,” Galloway warned.
Facebook registered Libra Networks LLC in Geneva, Switzerland last month and expects to officially roll out the digital currency in the first half of 2020.