It has been a long time coming, it has even been alluded to in some Sci-Fi series such as Incorporated, where in the near future a corporation runs a country and is also a state in its own right. With Facebook earlier in 2019 officially unveiling plans to launch Libra, its own (along with other corporate partners) digital currency, in 2020, it is almost safe to say that Mark Zuckerberg’s (despite being a public company, Facebook’s share structure and voting rights afford Zuckerberg a lot of control and power) social network is almost a country in its own right.
With approximately 2 billion monthly active users as reported at the end of 2018, even if you had to account for duplicate and fake accounts, it would still measure up as one of the largest populations any country has on the planet.
If you add WhatsApp, considering that the messaging app’s users will also be able to transact using Libra (once, or rather if, it eventually launches), with its reported 1,5 billion active users (although some are already Facebook users), you are looking at a size of a country like one we have never witnessed before.
Welcome to the People’s Republic of Facebook.
Strong political opposition
It didn’t take long after the official announcement of Libra earlier in the year that three countries, France, England, and Germany, started displaying signs that they were feeling threatened by Facebook & Co.'s newly proposed digital currency. Specifically, France’s Finance Minister stated unequivocally that Libra cannot be a replacement for sovereign currencies.
So far, it has not been an easy ride for Libra since that official announcement earlier in 2019. What looked like a good list of partners has been reduced with several of its (Libra Association) member companies deciding to pull their membership and support for Facebook's proposed digital currency. It all started with PayPal withdrawing from the Libra Association, this was then followed by Visa, Mastercard, eBay, Stripe and Mercado Pago who all announced that they will no longer be participating nor supporting Libra.
The withdrawals, which ended up leaving Libra without any major global payments companies as members, were politically motivated as the United States Senate sent a letter to the various Libra Association member organizations CEOs urging them "to proceed with caution until Facebook is able to provide real answers to you."
Despite this strong political opposition to Libra by various countries and regulators, which has also seen Facebook being hauled before the USA's policy makers to answer questions about the planned digital currency, I still think there is a high probability that not only will Libra launch in 2020, but it has better than average chances of gaining traction.
This is despite those involved in the Libra project at Facebook stating that there is no clear product roadmap nor a s et launch date.
However, important to note that Patrick Ellis, one of the board members of the Libra Association, confirmed to Reuters that Libra would launch during 2020, but couldn't provide any indication of when or even the initial markets it would be launched in.
Before I elaborate on why I think it will succeed, what will it mean for your money to be controlled and managed by Facebook?
Your money in Facebook's control
To further understand why some countries, including the USA, have been vocally opposing Libra in public, the letter that The United States House of Representatives Committee on Financial Services wrote to Mark Zuckerberg, Sheryl Sandberg (COO at Facebook), and David Marcus (CEO of Facebook subsidiary, Calibra), gives us a few hints in my opinion.
Firstly, as compared to say, Bitcoin, it is easier and possible to write to Facebook’s Zuckerberg and Sandberg regarding Libra compared to trying to write to Satoshi Nakamoto. In this case, there are real people and organizations that can be held accountable. Secondly, and as they allude to in the letter, the policy makers feel that Libra is a threat to the US Dollar and the country’s monetary policy, despite it being merely a stablecoin and not a cryptocurrency in the strictest of terms.
There’s also the matter that should Libra ever get into trouble (eg. not be able to guarantee customers withdrawals etc.), the US government in one way or another would need to step in to protect Americans as we’ve seen it do before with some of the country’s large banks (side note: this is exactly what Bitcoin avoids, but alas. A discussion for another day).
However, more importantly for us in Africa is, does Libra offer any of us any value?
Does it help us with anything we are struggling with currently?
Does it make life easier?
To use and transact in Libra, users will have to download and run the official wallet, Calibra (a subsidiary company of Facebook). From what I’ve seen and what has so far led me to say in its current form Libra will struggle to gain traction (unless they address the following two issues) is that to use Calibra one will require a bank account and a government issued ID.
It’s no secret that Africa has a high number of unbanked people mainly as a result of low income and unemployment. As such, it is mind boggling that a product punting financial inclusion would require users to first have a bank account before using it. However, it’s possible that this will change by the time Facebook launches the digital currency and wallet in 2020. If it doesn’t, it could prove to be a stumbling block for gaining traction especially across Africa.
The second issue, which also leads me to explaining why I think Libra will succeed, is around the requirement of government issued ID.
On the surface, in most countries in Africa at least, the requirement for a government issued ID could prove a real stumbling block to adoption. In many African countries, eg. Nigeria, there is no real organized government ID system. Immediately this makes it rather interesting how Facebook is going to verify identity in such cases.
However, Facebook and its Libra partners seem to already have thought of this and have a possible solution in mind. A solution which, once it can be implemented, will make a strong argument that Facebook is now essentially a country.
Facebook's possible Trojan Horse
Earlier in 2019 when the noise around Libra was at its peak and being frustrated that no African policymakers we commenting on it or providing any clarification on how they view Facebook's proposed digital currency that is mainly targeted a developing countries, I set out to read the Libra white paper for the third time. Somehow, I found something in the Libra white paper I had missed or wasn’t paying enough attention to previously.
Hidden (in plain sight) deep in the guts of a white paper light on details and heavy on marketing talk about financial inclusion and the world’s 2 billion without adequate financial services are two sentences that seem to be placed nonchalantly atop page 9 of the Libra white paper, yet they could have far reaching impact.
“An additional goal of the [Libra] association is to develop and promote an open identity standard. We believe that decentralized and portable digital identity is a prerequisite to financial inclusion and competition.”
This, the development of an open standard for digital IDs, as mentioned, could mean that Facebook already has a solution for part of this problem. The other part of this solution is that Facebook previously acquired a company that verifies government issued IDs in 2018. These two solutions combined could help onboard and verify people onto Libra and from there start issuing them with verified Facebook IDs.
Considering that Facebook, along with its subsidiary platforms like WhatsApp, Instagram, and Messenger, is home to over 2 billion people, could this be the new global ID standard that will surpass and be more trusted than government issued IDs?
Although I could not find any further details on the proposed Libra digital ID and Facebook have also refused to comment when I asked, in my opinion it has a far bigger impact than the proposed currency as, if adopted and rolled out successfully it solves one of the web’s biggest issues, trust. I can already envision how it fits in with some of its other acquisitions, for example, Facebook acquired a face recognition tool that it incorporated into its main Facebook platform that would identify faces in the photos you post automatically and suggest you tag them. This, could possibly be used outside of government issued IDs given the trove of (tagged) photos Facebook already has of billions of people around the world, to verify identity.
This to me is Facebook’s Trojan Horse with Libra a necessary part but of lesser significance than the ability for Facebook to be able to run a platform that can verify and vouch for the identity of billions of people independent from any government.
Managing the flow of money gives you some power. Handling trust and identities gives you control, and essentially, makes you a nation state.
A virtual nation state
As far as why I now think this completes the idea of Facebook becoming a country, it’s simply because of the leverage it will hold over some countries especially across the continent who not only do not have near as accurate data about their citizens like Facebook has, but are struggling to maintain the value and usefulness of their own sovereign currencies (e.g. Zimbabwe).
At the heart of it (Libra) people just want a quicker and cheaper way to transact and send money, and already in Africa, many are used to using mobile money for their daily living.
Apart from having such a huge virtual population, a currency, and possibly its own verifiable IDs for its citizens, Facebook also does not fall under any single country’s jurisdiction. For example, its US-based users are governed by a corporation registered in the USA, its users in the rest of the world are governed by a corporation registered in Ireland, while in China it works under different laws. This not only applies to laws but where it pays taxes too. So, as such, you cannot exactly call it a US company as it is not bound any single country’s laws and to make matters worse (or good if you’re Facebook) it is a virtual entity.
It really, in my view, has officially become the People’s Republic of Facebook (and like its namesake, it's not a democracy 😊)Share this via: