IN A BREATHTAKING LACK of self-awareness, Facebook, the least trusted company in the world in protecting customer's personal data, have announced that they plan to launch a new digital currency. It is to be called Libra.
As the use of any currency is dependent on having absolute trust in those who operate it. it may seem odd that it is to be led by Facebook, who have been described by Sherrod Brown, the most senior Democrat on the US Senate banking committee, as a company that has ‘burnt down the house over and over and called every [act of] arson a learning experience’. The participation of generally more trustworthy partners in the scheme, such as Visa, Mastercard and Paypal, will be vital to achieving acceptance.
David Marcus, a former CEO of Paypal has pointed out that Facebook would need to make strong commitments on privacy and security to win back users’ trust.
Libra, which is to be run by an independent Swiss-based, not-for-profit, organisation, is now reaching out to governments around the world for permission to operate in their various economies, but at the recent meeting of G7 finance ministers last July, a fair amount of cold water was poured on their plans.
French finance minister Bruno Le Maire declared that no independent currency could be allowed to assume the level of power or role enjoyed by sovereign currencies, and Olaf Scholz of Germany demanded that strict legal and regulatory questions be resolved before it could be be permitted.
A key risk is that this no government anywhere will allow this new currency system to become a channel for anonymous players to engage in money laundering and so it will have to achieve a very high standard of transparency and identification of identity; and, as it happens, Swiss regulators don’t have much of a reputation for ensuring either of those.
But to have a hope of being allowed it will have to be achieved. Everybody with a Libra account will need watertight proof of identity. Pretending to be a different person or organisation than you really are will be completely unacceptable.
This may not be easy, but it certainly can be achieved – tiny Estonia do it for every citizen – a properly managed blockchain-enabled proof of identity is quite capable of proving that you are who you say you are.
And I suspect that this is one of the major reasons that Facebook is driving this initiative; for Facebook has a huge problem with determining the identity of its members – with anonymous users posting libelous, offensive, fake news or otherwise illegal postings.
When they cancel the account of such transgressors they simply pop back up again with a different identity. This makes it impossible for Facebook to regulate their content in the way that so many governments are demanding.
In Germany for example, which has very strict anti hate-speech laws, Facebook is forced to employ over 1,200 moderators, about ten per cent of its total, to check and censure content and avoid fines which could otherwise amount to €50m.
In the long term I have no doubt that Facebook would very much like to have a proof of identity solution for as many of its 2.4bn users as possible, and that once such a system is established it could undoubtedly offer this highly valuable feature to others, for a small fee.
A lot of fuss has been made about Libra as a currency, but the real goal is probably to absolutely prove that you are you.