Facebook has announced plans to operate its own digital currency – the Libra – from 2020. It will be a cryptocurrency like Bitcoin, but far more stable as it will be backed by private reserves of regular major currencies. The idea is for Libra to be a new global currency, available for use by Facebook’s 2.5 billion users to make payments and low cost money transfers across borders.
At first glance, this looks useful to the proportion of Facebook users who are currently unbanked, or who are forced to use expensive money transfer services to send remittances home. Perhaps the Libra can spark change that will benefit the large proportion of the global population who are poorly served by the current financial sector (approximately 2 billion people are unbanked).
However the sheer scale of Facebook means that the potential emerging power dynamics are concerning. Chris Hughes, a co-founder of Facebook who now chairs the Economic Security Project, has pointed out that if a significant fraction of Facebook’s users adopt Libra, power over global monetary policy could shift quite rapidly from Central Banks to the handful of private companies that are backing the Libra project with Facebook. The sector as a whole risks being disrupted, with unpredictable outcomes. Transparency and accountability – already in short supply in the finance sector – risk becoming much worse. Are we willing to trust Big Tech with even more power?