Facebook cannot be said to lack imagination or nerve. The titan of Menlo Park, California is accused on both sides of the Atlantic of undermining public debate in the West, of endangering democratic processes in the free world, and of favoring populist and anti-establishment movements. Facebook is also accused of facilitating the spread of ethnic hatred and helping authoritarian regimes crackdown on dissent, as well as repeatedly violating users’ privacy, abusing its dominant position and evading taxes. Even so, Mark Zuckerberg’s group has decided to take another quantum leap, printing money as if it were the largest sovereign state in the world.
Starting in 2020, Facebook will have its own virtual, digital currency, named Libra and based on blockchain technology. The community of 2.5 billion friends will be able to exchange money, buy products and at some point use financial services traditionally offered only by banks, such as deposits and loans.
The new currency will be backed by an ad hoc fund, already joined by 28 major companies, including Uber and Mastercard, each paying at least 10 million dollars. The 28 are expected to grow into 100 founding members by the launch date. However, little else is known beyond Facebook’s announcement. Libra will be regulated by the Libra Association, a Swiss institution independent of Facebook, to be appointed by the founding companies, and the cryptocurrency will also have its own central bank known as Libra Reserve. We know nothing more of the rules and governing bodies that will control the operations of the digital currency.
Facebook’s challenge is to make cryptocurrencies mainstream, popular and commonly used, while avoiding the risks of fluctuations in value seen by Bitcoin and other players in the current market. Libra payments can be incorporated into any business wishing to adopt the new digital currency, while Facebook will launch an app, Calibra, a digital wallet integrated into its social media, from Facebook and WhatsApp to Instagram. The only step required will be to upload ID (to Libra), providing the option to make or receive payments anonymously.
The information provided by Facebook adds little else; analysts and politicians wonder whether Libra will be a currency, a security or a fund. This is no small matter as the nature of Libra will have significant consequences from the perspective of independent regulations, not those self-imposed by Facebook, but those with which it must comply. Its nature is also a major concern in terms of which body will be responsible for overseeing its work. Zuckerberg is attempting to convince international regulators that Libra is not intended to transform Facebook into a bank or fund, just as it has so far refused to be treated as a publisher or telecommunications platform, requiring rules divergent from convention and suited to these times of digital revolution.
This is where the issues begin, given the history of Facebook. Doubts have arisen over replacing currencies issued by central banks with one governed by Facebook, in particular whether their cryptocurrency can be entrusted to a digital platform which, in recent years, has breached every possible rule, first by denying any wrongdoing, then by apologizing but continuing to betray the trust of users and regulators.
It therefore seems unlikely that a world committed to limiting the power of Facebook—not only in terms of their business monopoly, but also in terms of their weakening of society’s intermediary bodies and public opinion, with detrimental effects on open society—would permit the Silicon Valley giant to also revolutionize the global payments system and let it take a dominant position in financial services as well.
The G7 decided to address the issue, by speaking out against the idea that a private company could have the same privilege—granted to sovereign nations—of creating payment instruments without democratic controls or obligations of any kind. The same doubts have been cast by the European Central Bank and the Bank of England. India has said it is ready to ban its circulation and even Donald Trump has spoken out negatively on Twitter. U.S. Senate hearings have resulted in the same negative outcome, while the Bank for International Settlements, the central bank of the central banks, has warned of the potential risk to competition, financial stability and the welfare state in the event that Facebook is allowed to launch Libra. The risks are obvious: via Calibra, the digital wallet, Facebook will be aware of the income and expenditure of its users and could offer merchants a sophisticated algorithm to maximize the price that each individual user can afford for any given product.
Facebook will also know all the secrets of companies that move money through its digital wallet, resulting in a competitive advantage over any other commercial operator. There will be no commissions on payments, but Facebook and the other founders will be able to reap the interest accrued on the dollars and euros deposited in the bank to buy Libra, so much so that a return on the initial investment is expected in a short time.
Governments, regulators and antitrust authorities will also have to ask themselves what would happen if the currency were digitally stolen or the Libra system were hacked: who pays, who guarantees the deposits? It is very dangerous, experts say, to allow the launch of a private system of global payments that, in the event of problems, will be too big to fail and will need public money to settle losses.
Facebook’s challenge is consistent with its long-standing strategic goal, to directly connect as many people as possible without regard for the consequences of the possible disintermediation of relations between customers and banks, supervisory authorities and monetary systems. In early 2019, Zuckerberg hinted that in the face of criticism of his business model, centered on profiling users for advertising purposes, Facebook was beginning to transform itself from a public square into a virtual ring where it could exchange money and goods in a safe and easy way. In technical terms, we could say “out of the frying pan into the fire.”
Christian Rocca is editorial director of Linkiesta and columnist of La Stampa. His last book is Close the Internet - A modest one proposal (Marsilio editori).
THIS WEBSITE (AND THE INFORMATION CONTAINED HEREIN) DOES NOT CONTAIN OR CONSTITUTE AN OFFER OF SECURITIES FOR SALE, OR SOLICITATION OF AN OFFER TO PURCHASE SECURITIES OR IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES (INCLUDING ITS TERRITORIES AND POSSESSIONS, ANY STATE OF THE UNITED STATES AND THE DISTRICT OF COLUMBIA) OR FOR THE ACCOUNT OR BENEFIT OF ANY U.S. PERSON AS THAT TERM IS DEFINED IN THE SECURITIES ACT (A "U.S. PERSON"), AUSTRALIA, CANADA, JAPAN OR SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD REQUIRE THE APPROVAL OF LOCAL AUTHORITIES OR OTHERWISE BE UNLAWFUL (THE "OTHER COUNTRIES"). THE SECURITIES REFERRED TO HEREIN HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR PURSUANT TO THE CORRESPONDING REGULATIONS IN FORCE IN AUSTRALIA, CANADA, JAPAN, SOUTH AFRICA OR THE “OTHER COUNTRIES” AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO A U.S. PERSON UNLESS THE SECURITIES ARE REGISTERED UNDER THE SECURITIES ACT, OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT IS AVAILABLE. NO PUBLIC OFFERING OF SUCH SECURITIES IS INTENDED TO BE MADE IN THE UNITED STATES, AUSTRALIA, CANADA, JAPAN OR IN THE “OTHER COUNTRIES.”
In any Member State of the European Economic Area ("EEA"), the information contained in this website is only directed at and may only be communicated to persons who are "qualified investors" ("Qualified Investors") within the meaning of Article 2(e) of Regulation (EU) 2017/1129 (the "Prospectus Regulation").
The information to which this website gives access is directed only at persons (i) who are persons falling within Article 49(2)(a) to (d) ("high net worth companies, unincorporated associations etc.") of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order") or (ii) who have professional experience in matters relating to investments falling within Article 19(5) of the Order or (iii) to whom it may otherwise lawfully be communicated (all such persons together being referred to as "relevant persons"). Any investment or investment activity to which this communication relates is only available to relevant persons and will be engaged in only with relevant persons, or in the EEA, with Qualified Investors. Any person who is not a relevant person, a Qualified Investor or otherwise permitted under applicable law or regulation to access the information, should not act or rely on the information contained herein.
Confirmation of Understanding and Acceptance of Disclaimer
These materials are for informational purposes only and are not directed to, nor are they intended for, access by persons located or resident in the United States, Australia, Canada, Japan or South Africa or any of the Other Countries. I certify that:
I am not resident of, or located in, the United States, Australia, Canada, Japan or South Africa or any of the Other Countries or I am not a U.S. Person; or
If I am a resident of, or located in, the EEA, I am a Qualified Investor within the meaning of Article 2(e) of the Prospectus Regulation; or
If I am a resident of, or located in, the United Kingdom, I am a Qualified Investor and a relevant person.
I have read and understood the disclaimer set out above. I understand that it may affect my rights. I agree to be bound by its terms and I am permitted under applicable law and regulations to proceed to the following parts of this website.
WARNING: the above certification constitutes a "self-certification" pursuant to Decree of the President of the Italian Republic No. 445 of 28 December 2000. False certifications are punishable by law.
You must read the following information before continuing.
The information contained in this segment of the website is not intended for, and must not be accessed or distributed or disseminated to persons resident or physically present in the United Kingdom, Canada, Australia, Japan or any other jurisdiction in which it is unlawful to do so. The information also is not intended for, and must not be accessed or distributed or disseminated to persons resident or physically present in Italy who are not “qualified investors” (investitori qualificati), as defined in Article 2, letter e) of Regulation (EU) 2017/1129 (the “Prospectus Regulation”) pursuant to Article 1, fourth paragraph, letter a) of the Prospectus Regulation as implemented in Italy by Article 35, paragraph 1, letter d) of CONSOB regulation No. 20307 of February 15, 2018.
By clicking the button below labeled “I agree”, you are certifying that (A) if you are in the European Economic Area, you are a “Qualified Investor”; (B) you are not accessing this portion of the website from the United Kingdom, Australia, Canada or Japan; (C) if you are a resident or physically present in Italy, you are a qualified investor as defined under the Prospectus Regulation as implemented in Italy by Article 35, paragraph 1, letter d) of CONSOB regulation No. 20307 of February 15, 2018; and (D) you are not located in a jurisdiction where it is unlawful to access this portion of the website.
You acknowledge that the information and statements contained in the document you are accessing on this website speak only as of the date of such document (or such other date(s) specified therein), and such information and statements may become inaccurate, stale and/or out-of-date thereafter and should not be relied upon for any investment decision.
You acknowledge that the materials on this website that you are accessing are confidential and intended only for you and you agree you will not forward, reproduce, copy, download or publish any of such materials (electronically or otherwise) to any other person if this is not in accordance with the law.
You acknowledge that the access to information and documents contained on this portion of the website may be illegal in certain jurisdictions, and only certain categories of persons may be authorized to access this portion of the website. If you are not authorized to access the information and document contained on this portion of the website or you are not sure that you are permitted to view these materials, you should leave this portion of the website.
You acknowledge that no registration or approval has been obtained and Eni Gas e Luce S.p.A. società benefit and its affiliates assume no responsibility if there is a violation of applicable law and regulation by any person.
By clicking the button below labeled “I agree”, you are confirming that you have read and understood the disclaimer above.
If you cannot so confirm, you must exit this portion of the website
