The inherent purpose of cryptocurrency is the protection of our online and economic freedom. Facebook, a frequent abuser of such digital rights, now seeks to capitalize on Libra, its newly proposed cryptocurrency, without actually adhering to these fundamental principles. It was only a matter of time before people started asking the tough questions that could cost big tech millions.
According to a new Reuters report, House lawmakers have introduced a proposal that would prevent big tech companies from functioning as both financial institutions or issuing digital currencies at the cost of over $1 million in daily fines. The drafted bill, entitled “Keep Big Tech Out Of Finance,” is currently being pushed for discussion by the Democratic majority leading the United States’ House Financial Services Committee, though could generate bipartisan support even from the President.
To be clear, this bill exclusively targets big tech’s institutions on an anti-trust basis, not independent alternatives. The bill dictates that: “A large platform utility may not establish, maintain, or operate a digital asset that is intended to be widely used as medium of exchange, unit of account, store of value, or any other similar function, as defined by the Board of Governors of the Federal Reserve System.” It later defines “a large platform utility” as any technology company which earns annual global revenues upwards of $25 billion — which includes Facebook.
The threat follows recent Congressional testimony from David Marcus, the former PayPal president turned Facebook executive working under its financial subsidiary Calibra, who proved the social network isn’t worth the benefit of the doubt. In his prepared remarks, Marcus expressed that Facebook wouldn’t launch Libra until they’ve “fully addressed regulatory concerns” from both the United States and Switzerland governments, though company actions have shown resistance to accountability.
According to The Verge, there is still no established charter in place determining how the Libra Association conducts business, nor a clear process for how their reigning representatives will rise to power, both of which contradict Facebook’s previous statements promising it will protect user rights by design. These liabilities sparked an interesting exchange between Marcus and progressive Rep. Alexandria Ocasio-Cortez (D-NY) over the nature of currency as a “public good”:
AOC: “This governance over the reserve is the Libra Association, correct?”
Marcus: “Yes, it is, congresswoman.”
AOC: “And so currently the Libra Association is governed by Facebook, Uber, eBay, Spotify, Visa, Thrive Capital, Union Square Ventures, and a handful of nonprofits as well as some other partners, correct?”
Marcus: “It is correct.”
AOC: “Were they democratically elected?”
Marcus: “No, congresswoman, but we hope that we will have the proper regulatory oversight, because we agree with you that this should have the proper oversight to ensure proper —”
AOC: “So who picked the founding members of this governance over the currency?”
Marcus: “Congresswoman, the membership is open based on certain criteria. The first 27 other companies that have joined are the companies that have shared that desire to come and build this network.”
AOC: “I see. So we are discussing a currency controlled by an undemocratically selected coalition of largely massive corporations. Do you believe currency is a public good?”
Marcus: “Congresswoman, I believe that sovereign currencies should remain sovereign, and we do not want to challenge sovereign currencies. We just want to augment their capabilities in a way that they can be —”
AOC: “But do you believe currency is a public good?”
Marcus: “Congresswoman, I believe that sovereign currencies are sovereign, and as a result they should continue —”
AOC: “So do you believe Libra should be a public good?”
Marcus: “Congresswoman, again, we will work with all of the regulators and address all concerns, and the regulators will determine —”
AOC: “I’ll take that as a no. I should take that as a no?”
Marcus: “It is not for me to decide, congresswoman.”
AOC: “OK, I’ll take that as a no.”
Who will decide the currency’s purpose is Facebook and its 28 partners, which include the likes of Mastercard INC, PayPal Holdings Inc, Uber Technologies Inc and others all united under the Libra Association. As it stands, no banks are currently involved with the organization, thus removing the big tech coalition from being scrutinized under banking laws. Two dozen oligarchs, bound to no charter or legal obligation, ruling over the financial future of a potential 2.5 billion user base— now what could possibly go wrong?
As reported in a TechCrunch investigation, “there are no plans for the Libra Association to even take a role in actively vetting [developers],” revealed Facebook’s VP of product Kevin Weil. “The minute that you start limiting it is the minute you start walking back to the system you have today with a closed ecosystem and a smaller number of competitors, and you start to see fees rise.” To borrow the non-bullshit translation from TechCrunch’s journalist Josh Constine, “the minute we start responsibly verifying Libra app developers, things start to get expensive, complicated or agitating to cryptocurrency purists. That might hurt growth and adoption.”
During the same hearing, Sen. Kyrsten Sinema (D-AZ) asked whether the Libra Association would entitle U.S. citizens to basic protections of recuperating lost funds if they were potentially scammed by a Pakistani developer via a Thai exchange and a Spanish wallet. Marcus only stated that U.S. citizens would use American Libra wallets and would educate users on how to avoid scams, not whether it’s able to provide these protections in the first place. Knowledge is almost useless without proper infrastructure and good moral character at the charge.
The suspicion of the Libra coin even reached the White House when President Donald Trump tweeted big tech must adhere to a banking charter and global regulations if they wanted to “become a bank.” His current chairman for the Federal Reserve, Jerome Powell, also told lawmakers that Facebook’s plan to build a digital currency could not move forward unless it addressed concerns over privacy, money laundering, consumer protection and financial stability.
No matter your judgement of the current administration, their recognition does mark a huge milestone for both the future of cryptocurrency and Facebook’s invasive attempts moving forward. In fairness to Facebook, it does maintain some crypto-privacy that’s seemingly reserved only for itself. During the hearing, Marcus told Congress that Switzerland’s infamous data protection agency would keep in contact to oversee data and privacy protections, even though a spokesperson for the agency told CNBC the social network has been ignoring their presence.
“We have taken note of the statements made by [Marcus] on our potential role as data protection supervisory authority in the Libra context. Until today we have not been contacted by the promoters of Libra,” said Hugo Wyler, head of communication at the Swiss Federal Data Protection and Information Commissioner (FDPIC). “We expect Facebook or its promoters to provide us with concrete information when the time comes. Only then will we be able to examine the extent to which our legal advisory and supervisory competence are given.”
To put it mildly, no one trusts the elusive Facebook, and why should they?
As we reported last week, the company has scandals upon scandals proving that when left to their own devices, Facebook is a cesspool for user exploitation. These include its unsecured database of 1.5 million emails and passwords, allowing advertisers access to users’ “shadow contact info,” allowing device makers access to private profiles, the site’s spyware VPN used to secretly surveil minors, its media suppression of independent outlets after mainstream partnerships, its non-consent facial recognition software database, its political advertising systems with disastrous fraud problems and even bribing editors of Wikipedia to cover up such scandals from the public. When designing a privacy-based currency, who’s to say the niche won’t just serve as a one-way privilege for themselves?
In turn, the cryptocurrency community has shown critical resistance to Libra.
Sources for the Verge have argued “it was not a cryptocurrency”, that Libra “was not based on a blockchain” and that by design “it violated the decentralized vision of cryptocurrency” from Bitcoin creator Satoshi Nakamoto. This was showcased in a follow-up blog post from Marcus where he refused to answer whether it will act as a blockchain, an encrypted system of peer-to-peer financial transactions allowing for proof of exchanges without behind the scenes gaming from centralized management.
When you’re a pervasive monopoly such as Facebook, where any convenient data is simply yours for the taking, forgoing oversight power is out of the question.
This isn’t to say Libra can’t be a thoughtful solution in theory. Facebook is a platform built on the foundation of social capital. It is truly an attention economy. The service relies on the fact it’s used by friends, family, co-workers, lovers, exes and the wider society we occupy. Facebook just built the pipelines, but not the relationships that determine its life and market value.
Libra could allow Facebook to function similarly to the economy of Steemit, a social media alternative that rewards users for the attention generated, which can distribute wealth back to the people. Rewards shouldn’t come at the expense of digital rights, however, which Facebook will need to rectify in its own social network ranks before even daring to enter crypto.