SALT LAKE CITY — Facebook revealed its plans Tuesday to create a cryptocurrency called Libra that will let users all over the world buy things and send money quickly with low or no transaction fees.
The social media company published a white paper explaining the technology saying, "Moving money around globally should be as easy and cost-effective as — and even more safe and secure than — sending a text message or sharing a photo."
But skeptical consumers are already wondering why they should trust Facebook, which has repeatedly mishandled users' private information, with something as important as their money. While some cryptocurrency fans are ecstatic that Facebook may provide a way for payments made with this technology to become mainstream, others are worried it's just another way the giant tech company will be able to control people's lives.
"While no one wants to choke innovation unnecessarily, Facebook hasn't exactly done much to earn everybody's trust in recent years," Lionel Laurent wrote for Bloomberg. "Any chance to put the necessary controls in at the beginning, rather than firefighting down the road, should be grabbed by the regulators."
Jenny Kane, Associated Press
In this March 13, 2019, file photo Facebook, Messenger and Instagram apps are are displayed on an iPhone in New York.
Proving that private information will be protected is a crucial task for any bank or financial institution, but even more so for Facebook, which collects detailed information about its users including their interests, Internet activity, location, friends, relationship status and education.
Facebook has already faced scrutiny from politicians at congressional hearings about the company's privacy and security issues, and now, reports suggest federal regulators could investigate potential antitrust violations.
Last month, the U.S. Senate banking committee wrote a letter to Facebook CEO Mark Zuckerberg asking how Facebook would protect users' financial data amidst reports that the company was recruiting financial firms and online merchants to help launch a cryptocurrency-based payment system — as well as asking U.S. banks to share detailed information about consumers.
Facebook said it received the letter and will respond to the senators' questions, CNN reported. In the meantime, the white paper outlines how Facebook plans to distance itself from direct management of Libra and will "continue to evaluate new techniques that enhance privacy."
How it works
Libra will launch in 2020 and will be built on its own blockchain, a decentralized database that records the history of transactions over time.
Once launched, users will be able to buy Libra and add it to a digital wallet. Libra will be available through a standalone app as well as Facebook Messenger and WhatsApp, so users can send and receive money via messages.
The software running it will be open source, meaning any developer can build applications that will use or hold the currency. Eventually, Facebook imagines Libra will be used for offline payments, such as paying bills, buying groceries or paying for public transport.
That will be possible, according to the white paper, because Libra will be directly backed by government currencies like the dollar or euro, meaning its value won't fluctuate wildly — unlike Bitcoin, the best-known cryptocurrency.
Gillian Flaccus, Associated Press
In this Feb. 7, 2018 file photo, a neon sign hanging in the window of Healthy Harvest Indoor Gardening in Hillsboro, Ore., shows that the business accepts bitcoin as payment.
Zuckerberg explained the philosophy behind Libra in a Facebook post Tuesday: "It's available to anyone with an internet connection and has low fees and costs. And it's secured by cryptography which helps keep your money safe. This is an important part of our vision for a privacy-focused social platform — where you can interact in all the ways you'd want privately, from messaging to secure payments."
Libra represents a new business model for Facebook, economist and visiting researcher at Imperial College London, Catherine Mulligan, told New Scientist. The ease of using Libra to make payments within Facebook-owned apps may result in higher engagement and more eyeballs on its sites at any given time, she said. "They can retain you on their platform," said Mulligan.
Through Libra, Facebook also aims to provide financial services to people without bank accounts — an estimated 1.7 billion adults worldwide, according to the World Bank, two-thirds of whom own a mobile phone.
But that worries Mulligan. "I would be quite concerned about Facebook becoming a bank for people who are in vulnerable situations," Mulligan told New Scientist, citing privacy concerns and the firm's poor track record of handling user data.
But Facebook won't be managing Libra directly. Instead, a subsidiary of the company called Calibra will handle the cryptocurrency. Company representatives said Calibra will not be allowed to share any of its financial customer data — like account details or purchasing info —with the rest of Facebook. But there may be exceptions for incidents like fraudulent activity, according to The New York Times.
In addition, Libra will be governed by the Libra Association, a nonprofit entity based in Switzerland. The association is independent from the social network and will be overseen by 27 for-profit and nonprofit companies, including Mastercard, PayPal, Visa, Uber, Spotify, Coinbase and Women's World Banking. Each is expected to invest at least $10 million and will have just as much power in decision-making as Calibra.
To acquire Libra, users are likely to have to show government identification like a driver's license to Calibra, which would make it unappealing for black market transactions like buying drugs, the New York Times reported.
Is it private?
Facebook is already used to plan and market events, advertise places to live and goods for sale, communicate with family and friends and share news articles. Some consumers are worried about letting Facebook design and control another critical aspect of their lives.
"Facebook already knows so much about you that the last thing you need to give the company is access to how you spend your money online," Chris Smith wrote for BGR "You might want to stay away from Libra until Facebook proves it has genuine respect over user privacy."
Additionally, some leaders in cryptocurrency say Libra doesn't support the spirit of the cryptocurrency field, which has prized decentralization.
Peter Todd, a Bitcoin developer, wrote on Twitter that such corporate virtual currencies will result in "privacy disaster panopticons that give massive power to big corporations and thus government."
Richard Dennis, founder of cryptocurrency marketplace Temtum, told CNN, "With Facebook one of the biggest hoarders of personal data on the planet, there's a complete contradiction of what cryptocurrencies are meant to be — no one entity should hold the power, the data or most importantly control user funds."
Zuckerberg, however, says control is decentralized because there are 27 partner companies. He hopes eventually there will be 100 partner companies.
The project "actually has more privacy and decentralization built in than many expected," Josh Constine wrote for TechCrunch.
But there is no consensus among experts at this point as to whether Facebook will be able to keep its promises to maintain user privacy and security.
Facebook said account details will not be shared with Facebook or third parties for advertising purposes, except for cases of data sharing "to keep people safe, comply with the law, and provide basic functionality to the people who use Calibra."
"Your financial data will never be used to target ads on Facebook," Kevin Weil, vice president of product for Calibra told the New York Times.
But protecting user privacy and transaction data means Facebook will miss out on the opportunity to earn revenue by using that information to improve targeted ads. For now, Calibra won't make money. But Calibra's Weil told TechCrunch that in the future, Facebook could launch other financial tools through Calibra that it could monetize, such as investing or lending.
AP
This undated image provided by Calibra shows what the Calibra digital wallet app might look like. Facebook formed the Calibra subsidiary to create a new digital currency similar to Bitcoin for global use, one that could drive more e-commerce on its services and boost ads on its platforms. Facebook unveiled the ambitious plan Tuesday, June 18, 2019. (Calibra via AP)
"We realize people don't want their social data and financial data commingled," David Marcus, head of Calibra, said according to TechCrunch.
Calibra will not import your contacts or any of your profile information by default, but may ask if you wish to do so. If users are hacked or scammed, Calibra will refund lost coins when possible through 24/7 chat support, TechCrunch reported.
"People who use Calibra will have to trust Facebook's internal firewalls and security measures, of course," Robert Hackett wrote for Fortune.
from Deseret News http://bit.ly/2RnVax2
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