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Facebook’s Libra could win the crypto game without Facebook winning back our trust

Facebook’s Libra could win the crypto game without Facebook winning back our trust
[Photo: Kim Gorga/Unsplash]

Facebook has announced some details of its planned cryptocurrency project Libra, slated for launch next year with launch partners including Uber, Lyft, Spotify, PayPal, Mastercard, and Visa. Proponents hope the new digital coin will make it easier to send money online, including internationally.

But some critics and skeptics have already expressed worries about the plan.

Among their concerns:

  • Trust issues: Facebook’s repeated controversies regarding user privacy have many worried about integrating the social media platform with their financial lives. Facebook has said that while users will be able to send the currency, called Libra, using its messaging apps, it won’t integrate Libra and Facebook data. The currency will be managed by a Switzerland-based association made up of Facebook and the other partner organizations.
  • Regulation issues: The currency will likely have to get regulatory approval around the world. Transmitting money is regulated in many countries and states, and some regulators have expressed skepticism about the already-powerful Facebook moving into this new area.
  • Volatility issues: While Facebook says the association members will contribute funds to back the currency and keep it at a stable price, their ability to do so is yet unproven. A steady value, something that has proven elusive for cryptocurrencies like bitcoin, is likely necessary to get merchants and many everyday users to work with the currency without worrying that price fluctuations will erode their holdings.
  • Commitment issues: The currency may struggle without the support of banks, and there are none on the list of launch partners, though payment processors like Stripe and PayPal, and cryptocurrency firms like Coinbase and Xapo, are represented. Libra will likely need traditional financial institutions to store the funds association members contribute, and it will need banks to allow their customers to send traditional funds to buy the currency.

Despite these concerns, it’s not necessarily a given that consumer wariness of Facebook will harm the currency. Many people are already critical of banks, credit card companies, and money transfer services, but still use them because they’re the easiest way to send and store money. If Libra turns out to be widely accepted and user-friendly, it’s very likely that even some Facebook skeptics will grit their teeth and start using the currency. Convenience, after all, has a tendency to win out in the end.

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