The U.S. government has sent a letter to Facebook demanding a moratorium of any movement forward on Libra. This was likely part of Libra’s strategy, as it provides a legal reason to scrutinize user.
Video snippets of the congressional hearings with Mark Zuckerberg were all over social media last year. Zuckerberg was answering questions regarding the Cambridge Analytica scandal, attempting to smoothen U.S. lawmakers’ data privacy concerns.
It was both entertaining and worrisome. Senior U.S. Congressmen asked question revealing their confusion about Facebook’s business model, Whatsapp, and the general use of smartphones.
While Zuckerberg restated over and over how sorry he was for what happened on his watch, Congressmen demonstrated their lack of understanding for modern technologies – or maybe also their lack of preparation before the hearing.
We may have had a good laugh, but what’s not so funny is that pretty much nothing has changed since then. Eventually, data privacy doesn’t seem that important.
What’s seems much more important though, is U.S.-American dominance in global financial markets. Or in other words: The global hegemony of the U.S. dollar.
U.S. House of Representatives demands moratorium on Libra
Last week, the U.S. House of Representatives Committee on Financial Services sent a letter to Mark Zuckerberg, Sheryl Sandberg, and David Marcus, the key drivers behind the Libra project.
“We write to request that Facebook and its partners immediately agree to a moratorium on any movement forward on Libra – its proposed cryptocurrency and Calibra – its proposed digital wallet.”
It’s not a love letter. US legislators want to carry out a detailed investigation into the ramifications that the Libra cryptocurrency might have on its economy as well as globally.
“Failure to cease implementation before we can [examine the implications in a committee hearing], risks a new Swiss-based financial system that is too big to fail,” reads the letter.
Standoff with U.S. government a calculated strategic move
Libra is backed by 28 companies; some of the world’s largest and most powerful companies are part of the association – including Visa, Mastercard, and Paypal. All of these companies are well-connected to politicians and regulators.
Hence, there is little chance that this letter took Libra by surprise. But the management has nevertheless decided to launch the currency, even though they have almost certainly known what the U.S. government’s reaction will look like long before the launch.
It was a calculated strategic move. Facebook knew what’s coming but feels confident in their ability to get Libra going – so they took the gamble. As they expected a legal battle with U.S. lawmakers, Facebook has chosen Switzerland as the battleground, and U.S. lawmakers aren’t happy with it.
In the letter, they lashed out at Switzerland:
“It appears that these products may lend themselves to an entirely new global financial system that is based out of Switzerland and intended to rival U.S. monetary policy and the dollar. This raises serious privacy, trading, national security, and monetary policy concerns.”
Of course, the U.S. will have their ways to put pressure on Switzerland to cooperate. But it won’t be as easy as it would be in other countries, and that will give Libra some time.
Users will be the losers; more scrutiny and data gathering
What might follow next is a long legal battle between the most powerful government on earth and some of the most powerful private corporations. Even though it has just begun, it’s already predictable who will be the loser.
David Marcus issued the following note on Facebook in response to the letter:
“This is why we believe in and are committed to a collaborative process with regulators, central banks, and lawmakers […] At the core, we believe that a network that helps move more cash transactions — where a lot of illicit activities happen — to a digital network that features regulated on and off ramps with proper know-your-customer (KYC) practices, combined with the ability for law enforcement and regulators to conduct their own analysis of on-chain activity, will be a big opportunity to increase the efficacy of financial crimes monitoring and enforcement.”
More control, more centralization, more monitoring, and data recording – isn’t that what Facebook wanted in the first place? The way how this will likely pend out over the next months is Facebook using the government’s letter as a reason to force users to share all kind of private data, to meet “the government’s” requirements.
In the end, Facebook will get their currency – and the users’ data – and the U.S. government will get more oversight, too. Seems like a win-win situation – but the user’s rights to data privacy will get squeezed in the middle.
And who cares about that anyway? User data protection is not high on the U.S. government’s agenda – otherwise there would have been ramifications for Facebook in the aftermath of the Cambridge Analytica scandal.
Protecting the dollar, however, is very much on top of the U.S. government’s list of things to worry about. As long as Libra is not going to pose a threat for the dollar hegemony – which it won’t as long as it is a strictly controlled Facebook-internal means of payment – the government won’t care what Facebook does with their users’ data.