Click here to buy a new currency: Facebook and the future of money

Click here to buy a new currency: Facebook and the future of money

 Sherif Youssef

Libra – a new digital currency created by Facebook – has garnered significant political and media attention in the last few months. In June 2019, Facebook announced a blockchain-backed, ‘low-volatile’ global currency by a foundation called Calibra which aims to direct the new digital wallet across the Facebook platform. The announcement was supported by several companies, including Uber, Lyft, Spotify and Kiva. Since the publication of the Libra white paper, Facebook has faced extensive legal challenges from various politicians in the United States and the European Union, creating roadblocks to the currency’s launch, which was originally scheduled for January 2020.

In less than two decades, Facebook evolved from a start-up established in a Harvard University dorm room in 2004 to a multi-billion dollar business with almost 2.3 billion active users in 2019. Now, Facebook controls several digital platforms that are used by millions of users each day, including Instagram, WhatsApp and Facebook Messenger. This impressive growth – governed by the mantra of move fast and break things – came under a wave of political scrutiny and media attention [1] during the Brexit referendum and the U.S. presidential elections in 2016, as several journalists and academics [2] called for a full-fledged investigation into Facebook’s use of political advertising to influence the outcome of political elections via the spread of misinformation and propaganda posts, using innovative tools like digital newsfeeds that rewarded viral posts with more attention on the platform.

Facebook also used micro-targeting tools that enabled political and business advertisers to segment and target users based on their demographics and interests, as well as track them online to disseminate messages to them. Furthermore, political campaigns employed data mining techniques to access users’ private data, as in the scandals surrounding Cambridge Analytica and Aggregate IQ. While this media attention should be directed at the 2008 and 2012 Obama campaigns social media practices, as Facebook was also a driving force in these political campaigns. It is important to note that social media in general is currently playing a role in mass communication, while the Brexit referendum result was driven by deeply rooted socioeconomic issues, such as the de-industrialisation of local communities and high levels of income inequality, to name a few problems which are not being addressed by the contemporary political establishment.

The ‘big five’ technology companies (Apple, Microsoft, Amazon, Alphabet a parent company of Google and Facebook) are together valued at almost $5.2 trillion and employ over 1.2 million people. These large tech companies are bulldozing a variety of industries under the guise of offering ‘smart’ and ‘personalised’ solutions for citizens, including real estate; transportation (ride-hailing companies, such as Uber and Lyft); books (the Amazon Kindle and Apple’s iBooks); music (Spotify and Apple Music); healthcare (Google DeepMind); and now, personal finance, with the introduction of the Apple Card and Facebook’s Libra. These technology companies have been drawn to finance because combining user data with financial behaviour can create a full picture of a user, which can be used to predict future purchasing behaviour as well as to generate revenue for these companies and take away a vital market from Wall Street banks [3].

Combining Facebook’s digital platform with a digital currency is a seminal development, targeting roughly 1.7 billion people around the world who might use the platform. This is especially relevant in Africa, where WhatsApp is a major means of communication and mobile money transfers (MMT) are commonly used in daily financial transactions, since individuals in developing countries do not necessarily have a bank account. Facebook is thus tapping into a very promising market that will eventually create a revenue base for the company, while offering an opportunity to different citizens for financial inclusion.

Facebook’s brand is centred around the promise of building ‘communities’, creating an ‘open’ platform and having a sense of ‘responsibility’ towards its 2.3 billion users. However, as a global digital currency, Libra poses serious questions regarding how it will be managed and to what extent it could be used to launder money and finance terrorism. Another question to grapple with is to what extent user data, which was uploaded for free, will be combined with financial data across multiple platforms controlled by Facebook, given the ongoing privacy issues facing the company. This opens the door for increased political and scholarly attention to the value of data and how technology companies can be regulated in the near future.

We are at a crossroads: Should we allow technology companies to continue to collect and disseminate our private data, or should we choose an alternative mediums which is currently fairly limited and will not always be ‘free’, though it will not put our data up for sale to the highest bidder? There is an opportunity for alternative ecosystems to return to the promise of an internet that is a tool for empowerment and democratisation, rather than a tool for surveillance.

References:
[1] Check PBS Frontline documentary The Facebook Dilemma.
[2] Check for example: The Age of Surveillance Capitalism: The Fight for a Human Future at the New Frontier of Power by Shoshana Zuboff
[3] The Black Box Society: The Secret Algorithms That Control Money and Information by Frank Pasquale

 

Sherif Youssef is a doctoral researcher at the Centre of Enterprise and Entrepreneurship Studies at Leeds University Business School and The Bauman Institute at the School of Sociology and Social Policy. Sherif is an Organizational Theorist with a background in marketing and public policy. His research focuses on Hybrid organisations such as social enterprises in the emerging markets, which aims to address societal challenges while creating some financial revenues. He has a broader research interest looking at the economics of innovation, patient finance and economic growth.

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