Not every gamble pays off, and while Facebook is big enough to take the hit, its would-be venture into the cryptocurrency game may not make it to the finish line. Libra, the social media giant's proposed online payment system, had a lot of buy-in from mega-partners like PayPal and MasterCard. Many of them have recently backed out, and one economist has some thoughts why.
This week, the University of California, Berkeley's Barry Eichengreen published an op-ed laying out some of Libra's stickiest problems. The most obvious, as with most Silicon Valley unicorns, is privacy: If Facebook's crypto is too untraceable, it becomes a prime site for criminal transactions, including the possibility of funneling cash to terrorists. If Libra isn't secure enough, Facebook (which already has access to all your browsing habits) can track how you spend your money as well.
Libra presents some other unintended consequences, though, including some on the level of international monetary policy. Essentially, if Libra becomes too successful (its primary audience is global, rather than American), there's a chance that not enough of a country's residents' cash will reside in that country's own currency and financial institutions. If that sounds outlandish, consider that Facebook itself serves a significant plurality of human people alive today.
We already know that Facebook can reel us in for unpleasant, sometimes unaddressed reasons. While there could be significant advantages to a crypto like Libra, its investors seem to think the world isn't actually ready for — or interested in — what that future could look like.