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By Jesse Cohen
In case you missed it, Facebook (NASDAQ:FB) announced plans on Tuesday to launch a new global cryptocurrency called Libra.
The currency is managed by the Libra network, co-founded by several companies in both the payments and tech industries, including Mastercard (NYSE:MA), PayPal and Uber (NYSE:UBER). To facilitate transactions, Facebook also created a new subsidiary called Calibra that will offer digital wallets for the Libra.
The subsidiary will only share customer data with Facebook or external parties if it has consent, or in "limited cases" where it is necessary, Facebook said. That could include for law enforcement, public safety or general system functionality.
Will People Even Use Libra Coin?
More worrying are Facebook’s potential motivations for entering the payments market in the first place.
Facebook has a really bad reputation for a lot of reasons. Will people really trust them with their finances and hand over control of their money to Mark Zuckerberg, especially in light of revelations last year that U.K.-based Cambridge Analytica improperly accessed 87 million Facebook users’ data.
While we’ll have to wait and see, I expect the answer to be a resounding no. Facebook (NASDAQ:FB) already knows so much about you that the last thing you need to give the social media company is even more access, this time to your online spending habits.
For many, this risk isn’t worth taking.
According to a 2018 survey of 1,000 adults by personal-finance site MagnifyMoney, 91% of respondents not surprisingly said they wouldn’t trust Facebook to handle their payments.
Facebook says the launch of Libra is part of an effort to not only expand into digital payments, but also to offer unbanked consumers in underprivileged countries access to financial services for the first time.
However, the end goal Facebook eventually has in mind for Libra is to integrate the digital currency into everyday transactions, such as paying bills, purchasing a cup of coffee or paying for public transportation.
That would allow the world’s biggest social media network, which has over 2 billion users, to combine a customer’s transaction data with their social interactions and potentially sell it to the highest bidder.
It is for this reason precisely that global regulators have already sounded the alarm over Facebook’s Libra cryptocurrency, with U.S. lawmakers calling for Facebook to halt development while the concept is investigated.
Most harshly, Rep. Maxine Waters issued a statement saying, “Given the company’s troubled past, I am requesting that Facebook agree to a moratorium on any movement forward on developing a cryptocurrency until Congress and regulators have the opportunity to examine these issues and take action.”
Before Tuesday's announcement, Facebook was already facing significant backlash over mishandling user data. Those issues have led some government officials to call for Facebook to forcibly broken up.
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