Thu. Nov 21st, 2019

Facebook and its 'Libra' currency jeopardize monetary sovereignty | Economy

It's been a long time since Facebook lost confidence of the world. It has been a long time since he wants to be a country. The company of Mark Zuckerberg tries to connect two vertices that repel each other as magnetic charges of different sign. But what physics denies is replaced by ambition, which is as immense as an ocean without a shore. The social network aims to become a rich, overpopulated nation, with nearly 2.4 billion users (adding WhatsApp, Instagram and Facebook Messenger) to inhabit its digital land. A geography connected 24 hours a day that transforms a torrent of billions of data into floods of money; a new superpower born of technology, not the geopolitics of man.

Zuckerberg woke up 18 months ago with that dream. Since then, at the company's headquarters in Menlo Park, California, a team has worked secretly to recreate the economic and social identity of a country: its currency. The result is the pound forge. A cryptocurrency that the social network plans to launch in 2020 backed by 27 companies, including Visa, Mastercard and Uber, and that can be a geostrategic and financial Trojan horse. If (because this story is written in conditional) the 2,400 million users of the platform use this cyberdivisa to buy and send money (as is done in PayPal or WeChat) could become the largest financial institution on the planet. If every Western saver allocated a tenth of its funds to the pound, it would be worth two trillion dollars. The dawn of a colossus – and its destabilizing potential – in the bond market. "This currency is a big word and you have to manage yourself in areas of great caution," warns Emilio Ontiveros, president of Analistas Financieros Internacionales (AFI). "It's as if a new, powerful state issued a currency that was among the ten most important in the world." A currency that also holds the ability to yield the monetary sovereignty of weak nations.

The cryptocurrency of Facebook and its partners hide inside a "ticking" that exceeds the limits of the economy. Because, until now, the way in which money and payments are structured was the exclusive function of democratic institutions, not of the great technological ones. These days, regulators are wondering if the old tools of economic policy will serve to control these giants. Usurped the functions, the red lights are inflamed. "All the central banks of the world will oppose Libra and Mark Zuckerberg, who has a net wealth of 73.6 billion dollars, can take the risk of doing so. However, it has ample opportunities to lose out ", reflects Guillermo de la Dehesa, honorary president of the Center for Economic Policy Research (CEPR) in London. For now, the caution warned by Ontiveros extends. The Bundesbank warns of the "return to the Wild West within the monetary system" and the Bank of England approaches "with an open mind but not with an open door". A distrust that permeates the owners themselves. "I worry that Libra will do to the financial industry what Facebook did to privacy and public debate," warns Jonas Kron, senior vice president of the investment firm Trillium Asset Management, which has some 53,000 shares of the social network.

Technology again in the 21st century as part of the problem, not the solution; again Facebook will give explanations in the US Congress. On July 17, at the request of Democrat Maxine Waters, chairwoman of the House Financial Services Committee, probably, Libra's executive director, David Marcus, will tell a story that could read like this:

– Why have they created Libra ?, maybe ask Waters.

– We want to empower 1,700 million adults in the world who do not have access to banking services – the company will respond.

– Why should we trust Facebook? I remind you of the Cambridge Analytica scandal.

– We have reinforced the controls and the cryptocurrency is supported by means of payment (PayPal, Visa, MasterCard) with decades of experience in digital security.

This could be the start of the interrogation. But the acceptance of the currency will be a battle and Facebook knew it. There are clues. In January He signed the former Deputy Prime Minister of the United Kingdom, Nick Clegg, responsible for Global Affairs and Communication and, according to the Financial Times, Edward Bowles, from the English bank Standard Chartered, will join in September to deal with regulatory problems in Europe. Zuckerberg anticipated the storm. But above all, the fragility that technology has caused in many financial institutions. "The big platforms like Facebook, Google and Amazon are looking to take away business from banks, like Alibaba in China. Libra is the first broadside, "predicts Kenneth Rogoff, former chief economist of the IMF.


Because the Zuckerberg coin, the "Mark", as ironically proposes to call it Steve Forbes, editor of Forbes Media, is well coined. It is not a "bitcoin". It is what is called a stablecoin. It is supported by a basket of "traditional" currencies and bonds. With this architecture the volatility of cryptocurrency is avoided. And, being open source, anyone (think Amazon) can build applications on it. All with an eagerness: to control the two trillions of dollars that move the transfers on the planet. Facebook wants to send money at the cost of a WhatsApp. "Probably will start charging small fees for transactions to companies," Joaquin Robles, analyst of XTB broker, ventures. For now, consumers could save $ 25 billion in commissions. In exchange, yes, to deliver more data and trust a company that too often has been unworthy of it. Neither Fausto would agree to burn like that in hell. "Libra needs to convince that it will not break into the world's central banks, that it is not further refining its massive data capture, that it is not a new channel for money laundering," says Kevin Werbach, professor at the school of Wharton business and reference in digital technology. Of course, if the platform seeks to recover the trust (essence of banking services, trade and human relations) of society by releasing the pound, it will have to justify its contradictions. "Facebook's promises to welcome responsibility and regulation sound hollow. One only has to think about the decision to set the headquarters (Libra Association) of the cryptocurrency in Switzerland: the worst secret jurisdiction in the world. In terms of transparency, it's the same as opening a vegan café inside a slaughterhouse, "compares Alex Cobham, executive director of Tax Justice Network, an activist tax expert group.

Mistrust is the real currency that Facebook manages. Within its 27 partners there is no bank. Why? The platform approached, says The New York Times, large investment firms including Goldman Sachs, JP Morgan Chase and Fidelity but refused to participate, partly because of the regulatory problems and perhaps because the adventure is crowded. "JP Morgan is preparing its own currency and 13 of the world's biggest banks will launch their stablecoins next year. Will we trust Facebook more than banks? "Asks Giles Alston, an analyst at the British consultancy Oxford Analytica.

Zuckerberg's journey will cross dense fog patches. Tax avoidance, money laundering, privacy, regulatory concerns or the possibility that Standard & Poor's-libra is perceived as a pseudo bank deposit. Even time turns his back on him. The global Swift consortium, a world leader in secure financial messaging services, says Meng Liu, an expert at Forrester Research, "took more than 40 years to build a network of 11,000 banks to implement their solution."

But Facebook lacks the virtue of patience. His old motto "Move fast and break things" reveals his relationship with society and the hours. Scarce, very few will defend "the most terribly irresponsible actor of the technological panorama", qualifies Enrique Dans, professor of IE. So, what will be left behind so much broken porcelain din? Regulators will probably slow down the entry of pound into mortgage loans, loans, the purchase and sale of shares. "However, the threat to the transfer business is already there," says Ontiveros. A danger that rehearses its borders. "The currency works well as a means of payment but it is not a risk for the dollar. Because behind is the weight of the American taxpayer and the greatest military power in the world, "says Miguel Otero Iglesias, principal investigator of the Elcano Royal Institute. A battle that neither Zuckerberg would dare to give.

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