By Robert Weissman
Credit Facebook with this: The company sure is audacious.
In June, Facebook announced plans to start a new global currency.
Think about that. If it sounds troubling to you, trust your instincts.
Maintaining a monopoly over establishing the currency and making new coins is a defining feature of national sovereignty. Facebook wants to abrogate that right to itself – and do so on a worldwide scale.
What could go wrong?
From our point of view, a lot. We believe the risks are so great that regulators around the world should shut down this new initiative before it gets off the ground. At minimum, they should impose a moratorium on the idea until they are able to obtain answers to the very troubling questions the idea raises.
Upon learning of Facebook’s plans, we leapt into action. We quickly analyzed all the (limited) information available on the subject and pulled together an organizational coalition letter calling for a moratorium. Dozens of consumer and other groups signed on.
Why do we think the project should be cancelled or at least put on hold?
- Consumer Privacy: Facebook has an atrocious record of protecting consumer privacy. The Cambridge Analytica scandal made clear how little Facebook has done to protect privacy, but that’s just one in a long list of examples. Why then would we trust Facebook with holding data on billions or even trillions of transactions around the world? Facebook says it’s creating a new subsidiary that will hold this data and not share it with other parts of Facebook. Why should we trust this pronouncement? Facebook right now is tearing down walls between Facebook, Instagram and WhatsApp that it had previously said it would protect. Whether or not Facebook maintains this wall of separation, the new currency will enable it to glean even more information about its users, enabling it to engage in even more troubling advertising targeting and manipulation of consumers.
- Consumer protection: With an international platform using an international currency, it will be exceedingly difficult for regulators to crack down on bad actors who do business in the new Facebook currency. What happens when a lender in, say, Ukraine – perhaps failing to disclose where it is from – illegally tricks people into borrowing from them and then imposes improper fees, charges and super-high interest rates? How is a U.S. regulator going to do anything about that? Even more, what chance does a regulator in, say, Kenya have of preventing such abuses? There are serious questions that don’t involve traditional scams, too. For example, will Facebook and its corporate partners be able to gain information that enables them to price discriminate against users? How might that exacerbate racial inequalities?
- Antitrust and competition: The proposal also seems almost certain to exacerbate Facebook’s excessive market power and undermine competition. The risks are too great that Facebook will pull consumers into a closed Facebook ecosystem that will disadvantage competitors and consumers. It’s easy enough to imagine, for example, Facebook and its partners disfavoring competitors, including by excluding them, offering discounts to Libra partners or punishing those using alternative private currencies. If Facebook’s plans get to scale, then exclusion of competitors would be utterly devastating.
- National sovereignty and law enforcement: For smaller countries, the Facebook currency could displace the national currency, undermining the ability of national governments to maintain control of their monetary policy. If countries’ currencies come under attack, the Facebook currency could exacerbate the problem. Even bigger countries will face seemingly insurmountable problems: The Facebook currency seems designed to enable money laundering and to facilitate tax evasion and tax fraud. It also seems to provide a mechanism to facilitate evasion of economic sanctions.
Our new effort on the Facebook currency dovetails with two issue areas for which we have brought on new, full-time staff: ensuring online privacy and digital rights, and taking on monopolies and advancing competition.
Facebook’s proposal implicates both of these issue areas and makes clear how they interconnect with core democracy matters. Facebook has no business taking over governmental functions like issuing currency, precisely because it is not accountable and because its mission is to make profits, not advance the public interest.
Facebook’s plans may well fail on their own, but the corporation’s global reach makes it possible that its new currency could gain widespread usage. Once that happens, it will be exceedingly difficult to prevent the very identifiable dangers inherent in the concept. We’re going to work very hard to ensure regulators shut down this idea right now.
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