Facebook's Cryptocurrency Is Pretty Much Dead On Arrival

15 October 2019
Gear, Tech, Money, News, Facebook, Mark Zuckerberg
Image: Facebook

With Governments aligning in protest against the Libra Project, Zuckerberg's planned crypto is now hemorrhaging its most important financial partners

With almost 82% of the population on the social media platform, Facebook remains the UAE's most popular social network but that hasn't stopped Mark Zuckerberg from diversifying.

Cryptocurrency. It’s a strange realm of the money-making market and something that seems to divide audiences into those who proclaim its benefits, and then the rest of us – those who have no clue what it even entails and refuse to spend time gaining such knowledge.

While many have been put off by the instability of the market, it seems things have been relatively stable in the world of cryptocurrency lately. Just recently, rumours were sparked that clothing behemoth Nike was looking to dive into the world of crypto after they filed a trademark to create a digital currency called “Cryptokicks.”

But Nike may not be the only global business to enter the realm, after it’s been reported that Facebook is aiming to release its GlobalCoin cryptocurrency in 2020 under its “Project Libra” scheme.

For much of 2018, the secretive project was kept under wraps, even as the social media giant registered a fintech firm dubbed Libra Networks LLC, in Geneva (Switzerland) – a platform that would offer services in emerging technologies, including digital payments.

Facebook introduced a WhatsApp payments feature to the Indian market back in February 2018, in what was perhaps the first phase of the long-term digital payment feature that FB wants to introduce across its entire ecosystem. As Medium reports, the “Creation of blockchain group within the company followed by a reversal of bans on Cryptocurrency ads soon after that defined the trajectory of things to come.”

Rumours were then strengthened in 2019 after Facebook acquired its first blockchain startup. The Wall Street Journal then reported that Facebook was seeking $US1 billion in investment for its proposed stable coin. After Zuckerberg met Bank of England Governor Mark Carney last month to discuss the risks involved and opportunities such a project presents, the BBC stated that Facebook was finalising plans to launch its cryptocurrency in about a dozen countries by Q1 2020.

Facebook officially unveiled its cryptocurrency to the world earlier this year announcing the launch of what is indeed called Libra: a cryptocurrency developed in conjunction with a ton of other tech and finance giants — Spotify, Uber and Mastercard among them. However, Facebook wouldn't strictly own the currency. Ownership would go to The Switzerland-based Libra Project — in which Facebook is an investor.

Use of Libra won’t require a bank account, allowing people to exchange multiple currencies into digital coins via banks and brokers through Facebook’s new network. The currency will run with blockchain technology, with the information stored across a network of computers and then held online in digital wallets designed to increase security and anonymity for users.

According to Fortune, "the currency’s blockchain, which is open source, will be programmed in a new language developed by Facebook called Move. It will not only serve as a transaction record, but provide what one partner describes as an “innovation layer” that invites third parties to build smart contracts and other blockchain-based services."

Facebook hoped to have over 100 major commercial partners actively participating in the crypto. Foundation members include the companies mentioned prior, as well as Visa, PayPal, Coinbase, and venture capital firms like Andersen Horowitz and Union Square Ventures.

Ultimately, Facebook's ultimate goal was to create a digital payment mechanism that transcends its 2.1 billion global users, instead becoming a tradable and secure digital currency used for online transactions. It would work through the use of a new payment and storage system called Calibra, which can be used to transfer and pay for things online.

It's also designed to be the largest-scale solution yet to a very pressing problem in developing countries: the simple fact that 1.7 billion people worldwide, many of whom have access to a phone and therefore Facebook's platform, don't have access to traditional financial services like a bank or a debit card.

U.S. Lawmakers, who like it or not Facebook are going to have to win over to keep their plans ticking over, didn't agree. The House of Representatives’ Committee on Financial Services has called for a moratorium on Libra's development while they make sure that a cryptocurrency developed by one of the world's biggest tech companies doesn't pose a threat to the US financial system.

Now, they're not only seriously considering vetoing Facebook's launch of libra, but they're calling for a ban on Tech Companies getting involved in finance altogether.

"It appears that these products may lend themselves to an entirely new global financial system that is based out of Switzerland and intended to rival U.S. monetary policy and the dollar," the committee said. "This raises serious privacy, trading, national security, and monetary policy concerns for not only Facebook's over 2 billion users, but also for investors, consumers, and the broader global economy."

The Committee's announcement finished with a warning to Zuckerberg and co.: "Because Facebook is already in the hands of over a quarter of the world's population, it is imperative that Facebook and its partners immediately cease implementation plans until regulators and Congress have an opportunity to examine these issues and take action.

"During this moratorium, we intend to hold public hearings on the risks and benefits of cryptocurrency-based activities and explore legislative solutions. Failure to cease implementation before we can do so, risks a new Swiss-based financial system that is too big to fail."

Roughly translated, it was a classic boomer scream of 'WE DON'T KNOW WHAT THIS MEANS!' But it did raise serious and valid questions of whether or not Facebook, as a US-based company, should actually be allowed to set up what is essentially a rival, unregulated currency based out of a completely different country.

They then put up the roadblock on the matter altogether, drafting a piece of legislation known as the “Keep Big Tech Out of Finance Act," which is yet to be voted on If it passes, it'll make Libra illegal, and ban any other major tech firm from establishing their own cryptocurrency if they take in revenues exceeding $25 billion USD annually. If they go ahead, they'll face fines of over $1 million USD per day.

The US isn't the only major power that's taken a dim view of Libra. France and Germany last month pledged to block Libra from operating in Europe, while the Bank of England also warned Facebook that it would have to clear historically high legislative bars before it could launch in the UK.

The mounting pressure on the crypto has proven too much for its major partners to handle, and over the weekend, a potentially fatal blow was dealt to the would-be-currency as a huge amount of partners started pulling out. Both Visa and Mastercard announced that they were knocking Libra on the head, which as the Sydney Morning Herald noted, is a particularly serious blow to the currency's legitimacy.

"It also gave Facebook access to Visa and Mastercard's networks, which could have given a pathway for users to convert traditional currency into Libra," they wrote.

The two credit card giants were then followed out the door by a swathe of Crypto's original partners, from eBay to payment processing company Stripe. PayPal also pulled out earlier this month.

There's no doubt that Libra was a step towards a noble goal, but after the royal mess that was Facebook’s data and security breach, whether users could have trusted the social media giant with their money was another thing entirely.

Via GQ Australia