by Kalyn Stockman
Remember when Facebook announced the upcoming launch of Libra, a global cryptocurrency-based payments network? At first, the announcement sat well with potential consumers and investors. Cryptocurrency is appealing (fast, low cost, accessible, and typically secure), and Facebook seemed to have all the resources and connections it would take to tackle the market.
Since June, however, Libra has faced many problems and it seems as though the network is crumbling before our eyes. As of now, Facebook is not backing down from its plan to launch Libra. It is, however, considering certain changes as key investors back out and regulators voice skepticism.
What is the source of the skepticism from regulators and investors? Why might Facebook change the course of its project?
The Downfall Of Facebook’s Cryptocurrency
Originally, the Libra Association had 27 potential members. At the recent inaugural meeting, 21 charter members were officially signed on. Some of the companies that backed out include Visa, Mastercard, and PayPal. These were major losses for the Libra Association, as connections with banking and finance companies originally gave Libra instant legitimacy.
The seven investors that backed down from Libra mainly did so due to the high risks and concerns voiced by regulators examining Libra. Policymakers and regulators around the world are worried that the creation of a new synthetic global currency will threaten user privacy, cause money laundering, and endanger the global financial system.
Along with the regulatory concerns, Libra is being questioned simply because it is associated so heavily with Facebook. Facebook has not done the greatest job keeping the trust of their users with their many scandals in recent years. In fact, policymakers and regulators might use Libra as a gateway to question Facebook on other issues that have plagued the company such as data privacy and antitrust concerns.
Where Does Libra Go From Here?
Though the Libra Association is still planning to move forward with the project, they are not ignoring the concerns. David Marcus, who leads the Libra Association, has made it clear that the regulatory concerns are being taken seriously. He even suggested that rather than creating a new synthetic global currency (the original plan), Libra could consider using cryptocurrencies tied to national currencies such as the dollar or euro. Though the concerns are being publicly addressed, people seem to be worried that the Libra Association is moving too quickly and not taking enough time to resolve issues and address concerns.
If you ask me, Libra is a bold move but not necessarily a bad one. Technology service providers need to innovate to continuously meet the changing needs of consumers, and Facebook is doing just that. However, Aragon believes that enterprises in this type of situation should consider hiring somebody to manage the ethical impacts of these projects—a digital ethicist. A digital ethicist would be especially valuable to identify and navigate the ethical impact and legal and regulatory issues of Libra. Facebook could benefit greatly from a digital ethicist to lead the project through skepticism, backlash, and tough ethical decisions. Had Facebook hired a digital ethicist from the start, these regulatory issues and privacy concerns would have been thought through and addressed much earlier on.
Bottom Line
When Libra was first proposed by Facebook, it was a promising idea. We are living in the digital age, and Libra has the ability to show the true power of digitalization by giving people across the globe access to digital banking. But as so many issues arise, it makes me question where this project will go. If Libra launches, will people avoid using it because of potential risks? Or will the convenience of a new digital banking tool overpower regulatory and privacy concerns? On top of following how Libra plays out, be sure to monitor the emergence of digital ethicists in the future. We think that enterprises will recognize the need for them very soon, especially by seeing big companies like Facebook struggle so severely.