Is cryptocurrency Libra a good idea?
The US company Facebook has announced the launch in 2020 of its own cryptocurrency as a payment method. Libra, like Bitcoin, is based on blockchain technology, but the company claims it won't be subject to exchange rate fluctuations. Commentators discuss the repercussions for the financial world.
Facebook won't win this power struggle
Commenting in Les Echos the two economics professors Augustin Landier and David Thesmar question whether Facebook is up to the challenge of issuing its own currency:
“Silicon Valley is getting ready to create its own currency, a privilege that up to now has been reserved for the sovereign state. Many see this announcement by Facebook as a boundless extension of digital totalitarianism. ... By challenging states at the very moment when its dismantlement is under discussion, the company is exposing itself to a power struggle that it may well not be able to win. The Chinese giants and a few US financial technology firms have already established themselves in the payment system sector. So Mark Zuckerberg will need to pull off a Napoleonic coup here. But the libra may turn out to be his Russian campaign.”
Replace ancient payment methods with Libra
It's surprising that Facebook has taken so long to come up with Libra, comments Salvatore Rossi, a former director of the Italian central bank, in Corriere della Sera:
“Whatever it is that we need to pay for - a coconut, a computer, a haircut - we use archaic payment methods all around the world. Scraps of paper like bank notes or checks, or at best credit cards and cash dispensers. In the year 2019? In these times of instant and free transfer of texts, photos and videos? Incredible. Technology has offered far more efficient methods of payment for at least twenty years now. ... But we remain true to our tools from the Stone Age. So in fact it's surprising that ideas like this one from Facebook are only popping up now.”
Is your money in good hands?
Facebook is making a big effort to win back the trust of its users, observes Gazeta.pl:
“Facebook has explained that payments with the new cryptocurrency will be very secure. The transactions will be verified to prevent fraud. After the recent scandals over privacy this is particularly important. Facebook needs to make sure users are not afraid to entrust the company not just with additional information about themselves, but also with their money. ... If it turns out that Libra is easy to use and secure, it could become very popular. Above all because Facebook is used by billions of people who will then all have the cryptocurrency at hand.”
Access to even more sensitive data
After the series of scandals in recent years users may find it difficult to trust Facebook and its new cryptocurrency, the Financial Times notes:
“The system would offer Facebook access to an almost unrivalled treasure trove of financial information. Despite the company's claims to have developed more of a conscience over how it uses data, executives have suffered negligible consequences. While Calibra has pledged customers' account information will not be used to target advertising, Facebook's record on this front gives cause for doubt. ... It is difficult to accord full trust to Libra, as a project of a company whose commitment to users has been ancillary at best.”
Banks must take Facebook seriously
Under no circumstances should banks ignore the plans of the US company, De Tijd warns:
“Facebook has already signed a cooperation agreement with companies like Uber and Spotify that would perhaps readily accept Libra payments. And the initiative is supported by credit card companies Visa and Mastercard. ... The basis for a successful launch is in place. ... Facebook will have to overcome several obstacles, however. And bank activities go far beyond simply offering payment services. But it would be a mistake for the established players of the financial world to not take this Facebook offensive seriously. Because once the Internet giant has its foot in the door it will have an easy time pushing it open.”
Breakup is in the cards
Facebook's ever-growing power could be coming to an end, Libération believes:
“The moment is coming when economic clout will be dangerous merely because it exists. ... In controlling and monitoring the actions of billions of people, Facebook has acquired power rivalling that of nations. Louis XIV instigated a trumped-up trial against [his wealthy finance minister] Fouquet to put him in prison and end the state within a state. Today's powers wouldn't go that far. But the more power the new Fouquet acquires, the more they'll be tempted to have his empire divided into separate companies, as they did with the 'robber barons' at the start of the 20th century.”