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Globalcoin: the need-to-know on Facebook’s future cryptocurrency | bestbrokers.co.uk

Globalcoin: the need-to-know on Facebook’s future cryptocurrency

Although Facebook’s cryptocurrency is shrouded in mystery, some snippets have filtered through about Mark Zuckerberg’s pet project. Indeed, according to various sources Facebook is in the process of developing a digital payment system which should be implemented in selected countries as early as 2020, with testing planned to take place in India in 2019.


This is a companion discussion topic for the original entry at https://www.bestbrokers.co.uk/blog/2019/06/18/globalcoin-the-need-to-know-on-facebook’s-future-cryptocurrency/

It was only a matter of time before Facebook announced some form of entry into the crypto market and sure enough now we have it.

What we have here is the makings of a modern day jousting tournament between two of the richest men in the world. Jeff Bezos as the richest with an estimated net worth of 155 billion USD and Mark Zuckerberg with an estimated net wort h of 70.2 billion USD – both vying for attention to feed their apparent massive egos by reaching for, some might say, world domination in their respective fields.

Whilst JB has gone relatively dark with his plans, since Amazon’s mild foray into the world of cryptocurrency of 2017-18, which I spoke about here back in March of this year, we now have the young pretender, MZ, flexing his IT muscle for the entire world to see - and admire:wink:.

There is a certain perceived arrogance about Facebook’s proposal – whereby proposal could be loosely interpreted to actually mean ‘hell bent on’ – challenging the current systems of bank transfers, online payments and credit cards with their own global cryptocurrency.

Aside from the naked ambition of their plans to break into finance they seem to have overlooked potential resistance, which has already become a reality in some quarters, to their introducing an unfettered global currency.

The regulators are sharpening their needles in anticipation of puncturing Mr Z’s new scheme ahead of Libra taking off for real.

Amongst others, the French finance minister Bruno Le Maire has voiced concerns that this development by Facebook could offer a charter for money laundering, terrorism finance and general personal privacy invasion.

Similar sounds have echoed through the corridors of power in Germany and the UK with calls for the finance ministers of the G7 group to take a closer look at the proposed currency development and related protocols.

Even closer to home, in the USA Congresswoman Maxine Waters, chair of the House Financial Services Committee, has asked that Facebook should halt its plans until there has been a Congressional hearing on the matter as reported here in Reuters: " Facebook is continuing its unchecked expansion and extending its reach into the lives of its users. "

Who can blame this political scepticism given Facebook’s track record to date? The company’s ‘cavalier’ attitude to user data has been a matter of public record as highlighted by, but not limited to, the Cambridge Analytica scandal.

I have to join the sceptic’s side of the aisle on the ‘acceptance’, of what for now I will call PayPal2.

But first I must remove one element from the argument against that diverts from my real concerns.

Sure many of the regulators fears are valid but to argue, as Brunu Le Maire has done, that Facebook’s proposal presents a probable real conduit for money laundering and the possible financing of terrorism is (pardon the pun) a little rich – where was the similar outrage and dissent over previous cryptocurrency emergences?

I’m reminded of the somewhat hypocritical stance of the Egyptians, Indians, Lebanese, Saudis and Turks when they officially condemned Bitcoin a few years back citing fears that there was a great risk of digital currencies being used for nefarious purposes – much the same as Le Maire now – when those people had been historically using the hawala system, the cashless money transfer system invented by Arabs centuries ago, without so much as a murmur of objection as to the total lack of transparency, regulation or governance therein.

So no, whilst I believe that there is a very real possibility that the proposed system could, and probably would, be used for less than scrupulous financial transactions – as indeed current cryptocurrencies are no doubt being utilised – that should not be the key objection.

If governments allow the creation of “alternative currencies” like bitcoin or variations, as they so far seem open to, they deserve the nightmare of dealing with the financial and trade chaos and criminal ‘casinos’ that will ensue.

More to the point, it’s not clear that governments can or should prohibit such currencies. However, it must be stated clearly and firmly that under no circumstances whatsoever will the UK Government (or others) make good any losses sustained by those who participate.

As if to counter this the Libra Association has said that, “… unlike Bitcoin, Libra’s value will be backed by a reserve of stable currencies and government bonds, meaning its value will be stable and each unit of the currency will be insured by real assets…”. So they are guaranteeing stability of the new currency by tying its value to the old currencies they hope it will supersede? An interesting approach!

To me this offers more questions than answers, for instance:-

  • What will be the reserve asset ratio, who will set and regulate it?
  • Who will manage / own the reserve assets and how much will it cost to manage them?
  • Who will govern the Fiat part of the currency and how will it be issued (all mined block chain or by a management committee?)
  • If they start letting people borrow money, who regulates issuance? (Borrowing is how fiat money is also created.). What will be the interest rate and who will set it?
  • Who will stand behind it in a crisis?

In their proposal Facebook suggested that they have 100 global businesses associated with this product - I’ve yet to see the detail here, but have no doubt this is a real possibility – which, together, will have the economic firepower to redefine fiat currencies, offering a serious alternative in the money markets.

So they seem, on the face of it, to have covered that base - but what I can’t get over is that with Facebook’s track record on data and privacy, quite frankly I consider they shouldn’t be allowed anywhere near a currency or banking.

So interesting times ahead - as I’m sure there’s a great deal more we need to know about this!

It’s certainly going to be a ‘battle’ to watch as the ‘might’ of Facebook, with support from the likes of Mastercard, Paypal, Uber and Vodafone, effectively challenge the old guard of many smaller country’s central banking systems. With a targeted launch window for ‘Libra’ of 2020 there are still many questions to be answered before then …if it is to get up and running.

I can think of at least two established legal policies that the US government has in place that could act as major roadblocks for the launch - certainly for US customers/users - under the ‘Know Your Customer’ and ‘Anti Money Laundering’ laws. These would both enable the IRS to intervene if they decide to fully enforce the requirements thereof for this proposed cryptocurrency usage, and why wouldn’t they?