If you’re having trouble understanding the significance of Libra, the digital currency that Facebook says will be the basis of a new global payments and financial system, you may need to think back to Farmville.
That online game was, for a period, wildly popular on Facebook, as were dozens of others like it. These games were fairly cheaply produced by outside companies, conceptually simple, and, to use the preferred euphemism, extremely engaging. They kept some users logged into Facebook for hours and hours and they were free, at least initially. But to really play these games, you needed to continually make in-game purchases. And one way you could pay was with something called Facebook Credits. Yes, that’s right, Facebook had its own currency years before the Libra announcement this past week.
Facebook’s interest is its own survival, since a new financial utility ties in its social-media and chat customers. Still, the digitization of finance promises to make life easier and cheaper for billions of people. In China, where digital payments are ubiquitous, people transfer money to friends and firms within a chat app for almost nothing.
The Libra may “demote the power of nation states,” warned Claire Finkelstein, a national security researcher at the University of Pennsylvania Law School. In particular, smaller countries risk losing control of their economies as Facebook’s money takes root. Libra is expected to launch in 2020.“The Libra may undermine central banks in the developing world” assessed Chris Hughes, a Facebook-co founder. “Their power, he said, could be redistributed “toward multinational corporations and the central banks of the largest economies.”
To be certain, like Facebook itself, the Libra could do a lot of good for the world. But it’s the unforeseen consequences that our leaders must scrutinize. The global economy is at stake.