Mark Zuckerberg hasn’t cut a happy figure in the press in recent months. When he’s not being dragged in front of the cameras to defend his company’s latest data or privacy scandal, he’s being dragged into the forthcoming US Presidential elections. A few short weeks ago, he was vowing to defend the company from the threat of potential Democratic nominee Elizabeth Warren. This week, he’s apparently fraternizing with notable figures from the conservative side of politics.
In these highly fractured political times, appearing to throw your hat in with either side of the debate is sure to provoke an angry response from people who disagree with your standpoint. As soon as it was reported that Zuckerberg might have Republican tendencies, the hashtag #deletefacebook trended across the world and remained the number one trend in the United States of America for hours. In any normal week, that be Zuckerberg’s biggest headache. This week, we suspect it barely even registers with him. He has much bigger things to worry about – specifically the existential threat that has engulfed Facebook’s much-vaunted cryptocurrency, Libra.
When the white paper for Libra was first announced back in June of this year, it was clear that Facebook was very excited about it. This was the company’s vision of the currency of the future – a global, digital form of money that could bypass borders and become universal. People would have Libra wallets automatically attached to their Facebook, WhatsApp, Messenger, and Instagram accounts. It would be an instant user base of millions (if not billions) of people. The currency would have all the benefits of cryptocurrency without the requirement for the wallet’s owner to understand anything about crypto. Not only that, it would be so ubiquitous that it would instantly be a threat to PayPal. Not only could Libra theoretically become the most popular crypto, but it could also become the most frequently used medium for exchanging money across the internet.
Unsurprisingly, not everybody loved this idea. The US treasury was particularly frosty about the concept, and it was generally understood that the reception the idea received among major European and Asian financial regulators wasn’t much warmer. Some of the concerns that were raised were protectionist – the established players hate the idea of a new contender striding into the market and cutting away a large slice of their share. The arguments that Libra could ‘destabilize the global financial market’ can largely be dismissed as the complaints of companies who fear they would become less profitable if the currency were to become a reality. It’s actually one of the currency’s supposed best features that has ultimately turned out to be its biggest liability – anonymity.
The anonymous way in which Bitcoin and other cryptocurrency transactions can be conducted has long been cited as a concern. The only reason it’s never been a headline news concern is that no cryptocurrency has ever been mainstream enough to merit such attention. Facebook is mainstream, and that means Libra is mainstream. People and entities who typically ignore crypto have paid attention to the implications of Libra, and they don’t like what they see.
The main argument against the existence of a large, easy-to-access cryptocurrency is that regulators lose oversight of where money is going, and why. Authorities fear that Libra could become a means to launder money, and that law enforcement agencies would have no means of tracking such activity. Worse than that, they fear that Libra could be used to funnel money into international terrorism anonymously. The encrypted nature of Facebook-owned WhatsApp has already led to accusations in the past that the messaging service makes it easier for terrorists to communicate. The last thing the company or its shareholders should now want is also to be accused of making it easier for such groups to finance their activities.
Thus far, Facebook hasn’t come up with a satisfactory answer to the above concerns, and several of Libra’s most prominent backers have now withdrawn their support from the project. Among them are Visa, Stripe, Mastercard, eBay, and PayPal. The fact that companies such as PayPal were ever in agreement with the idea in the first place is mind-blowing considering the fact that a successful Libra launch would be hugely detrimental to their business model, but the withdrawal of so many huge household names at the same time will give the public the impression that something is seriously wrong. Once public confidence is lost, it’s a challenging path to win it back.
The issues Facebook is facing – both in terms of regulatory permission and public perception – reflect the problems that would face any form of crypto attempting to gain mainstream acceptance. Crypto is becoming more commonplace, but progress is slow. Five years ago, it was almost exclusively used on the dark web. Nowadays, you can use crypto to play casino games. We’re not sure which pioneering mobile slots website was the first to allow players to top up their accounts using cryptocurrency, but where one goes, others will follow. The net result is that many large mobile slots sites now allow for crypto payments. Mobile slots players aren’t especially technically proficient, and so if they can get their heads around the idea of using crypto, then it’s reasonable to assume most web users can, too. It’s just that other major industries are yet to follow suit, and Facebook’s plans for LIbra might just be a case of too much, too soon.
Facebook, at the time of writing, is still insisting that everything is fine, and the planned 2020 launch will still go ahead. They still have multiple big-name backers signed up to support the project, including Spotify, Vodafone, Uber, and Lyft. The more big business support the idea has, the better its chances of success are likely to be – but it won’t have gone unnoticed that the major names who have walked away from the table all operate within financial services. It would seem that the world of finance no longer believes that Libra is a sound business proposal. With support from such companies falling away, and no relaxation in the tone of those regulatory bodies who feel that Libra simply isn’t compatible with the current financial market, does it have a future at all? It’s too early to say, but the mood music surely can’t sound good to Zuckerberg.