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What Facebucks Can Do for the Global Poor (The Atlantic)
June 27, 2019
From the article:
This month, Facebook announced it was making an investment in crypto. More specifically, the company and its partners issued a long-anticipated white paper unveiling a new digital currency, a management mechanism for it, and a platform for its development. It is called Libra, a kind of half pun: The name refers to an ancient unit of measure, as well as sounding like the French and Spanish word for “free.”
That’s not the only potential drawback. Libra wants to be the currency of the internet, free and global and liquid. But being the free and global and liquid currency of the internet means being a facilitator of tax evasion and illicit payments. It means being a shadow bank, an unregulated one with no protections for consumers, businesses, or financial institutions. It means potentially facilitating currency crises and capital flight. If Libra were to become dominant, countries would lose a little grip—or perhaps a lot of grip—on their national accounts, monetary policy, and tax authority. “It would be revolutionary if it works, but getting it to work will require the buy-in of national authorities, and I’m racking my brain to think through scenarios where national authorities would want to promote a competitor to their own national currencies,” said Michael Pisa of the Center for Global Development.
Finally, there is the problem posed by Libra’s relationship with Facebook, which has come under fierce scrutiny for allowing users to organize racial violence, promote hate speech, and meddle in elections, as well as for trampling its users’ privacy. “It is hard to view Facebook as a benign force, given all that has emerged over the past few years about their operations in the developing world,” said Jeremy Konyndyk, also of the Center for Global Development. “Facebook has shown a consistent pattern of ignoring massive negative externalities of their platform, particularly if fixing those externalities conflicts with their revenue model. We can’t fully envision what those negative externalities might be under this new system—but tying people’s finances to a company with a history of privacy violations, information manipulation, and cross-cultural stumbles presents major concerns.” Already Congress and a number of regulatory bodies have called for scrutiny of the Libra project, with an eye to hemming in the power of the tech giant.