Mark Zuckerberg, the boss of the social network, must respond to the concerns caused by the project of money in front of US parliamentarians on Wednesday.
Simple turbulence or existential crisis? Presented mid-June in general excitement, Libra, the cryptocurrency project launched by Facebook, is going through a delicate period. On October 11, giants Visa, Mastercard, Paypal and Stripe, promptly followed by eBay and Booking, announced the withdrawal of their participation in the program, which faces growing opposition from institutions around the world.
Sign of the concern caused by this project, the boss of the social network, Mark Zuckerberg, was convened Wednesday, October 23 by a US parliamentary committee. What is this project? How does it work ? Should we fear it? Franceinfo goes around the question.
What is the Libra?
First problem, the term Libra covers both the name of the currency and the protocol that makes it work. On the official website of the project, the Libra (yes, we write the Libra, as the Game Boy) is thus presented as “a stable and global cryptocurrency, developed on the basis of a secure network”. In other words, it is a new currency, 100% digital, backed by a technology called “blockchain”, already used by other digital currencies such as bitcoin or ether.
Thanks to this technology, each transaction made in Libra is authenticated, encrypted and validated by multiple servers before being registered in an open registry, and hosted on these same servers. A way to protect against criminals who would like to hack the system to credit their personal account, while dispensing with an organization such as a central bank.
What would it be used for?
Asked by Franceinfo at the time of the formalization of the project, a Facebook official summarized simply the promise of Libra: allow the 2.7 billion active users of applications belonging to Facebook (Facebook, so, but also Messenger, Instagram and WhatsApp)“send money as you send a picture or text message to your favorite e-mail application”.
In the statement of intent of the project published on its official website, Libra is also a solution intended to help “adults in the world (who) are still excluded from the financial system and do not have access to a traditional bank, while one billion have a mobile phone and almost half a billion have access to the internet. “
“Even if there is of course a commercial interest, the Libra could on this point answer a real need”, analysis for franceinfo Grégory Raymond, journalist at Capital specialized in cryptocurrency and author of podcast “21 million” devoted to this theme. “With a simple smartphone at 30 euros, it will be possible to store and send Libra.This may potentially interest 1.7 billion people who are today 'debancarized'”.
Developing the Libra would also have a very concrete interest for Facebook: diversify its sources of income. The social network has indeed shot advertising almost all of the $ 16.7 billion in sales realized in the second quarter of the year. “If the Libra was massively adopted, Facebook could transform itself and offer services that are traditionally attached to classical finance, like credits”, analyzes Clément Jeanneau, co-founder of Blockchain Partner, a consulting firm specializing in cryptoactives and blockchain technology. According to this expert, “Payment is the new frontier of the 'tech' sector today, and Facebook is looking forward to getting a share of this cake.”
Concretely, how would it work?
To use this new cryptocurrency, it will first create an account on an application that will serve as a virtual wallet, it will be possible to credit by buying Libra with its usual motto. Facebook has already taken the lead by creating a subsidiary, Calibra, which will offer a program of this type.
“The computer code that governs the operation of the Libra being open, anyone can theoretically create his wallet applicationsays Gregory Raymond. But it is very likely that Calibra is the most used application: being at the heart of the project, Facebook will be closer to the technological evolution of its cryptocurrency. His tool will undoubtedly be the most developed on the market. “
Once his wallet is created, it will be possible to exchange Libra with his contacts from the ad-hoc application or from the different Facebook messaging services. The social network also plans to offer a professional version of Calibra to merchants and online stores who would like to accept this method of payment. We can imagine that it is possible to order the dress worn by your favorite instagrameuse directly in Libra, without leaving a second photo sharing application. Or settle a Libra race on the Uber app while traveling abroad, eliminating the problem of currency exchange fees.
In order to reassure authorities and individuals who might be frightened by the extreme volatility of cryptocurrency like bitcoin, Facebook promises that the value of Libra will remain stable. To keep this promise, the social network has decided to link the destiny of its currency to a “reserve of real assets” made up of hard currency, can you read on the project site. “For every unit of Libra created, a single unit of traditional currency will be kept in this reserve, and probably reinvested in very short-term state debt”, details Clement Jeanneau.
The definitive mix of the currency basket of this reserve is not yet finalized, but it would consist of 50% of US dollars, 18% of euros, 14% of yen, 11% of British pounds, and 7% Singaporean dollars, according to first indiscretions.
Who would control this currency?
Contrary to what one might think, Facebook does not hold alone the reins of this project. Libra association, in charge of the development and the good functioning of the network, is currently composed of 21 founding members, who form the council of the Libra, sort of Parliament of this new institution based in Geneva (Switzerland). To join the association, members must pay an investment of $ 10 million, or 9 million euros.
Among the members of this select club are the PayU online payment company, the Vodafone and Iliad telecommunications groups, parent company of the operator Free, Uber platforms, Spotify or Farfetch, blockchain actors like Anchorage, Xapo and Coinbase, venture capital funds like Andreessen Horowitz and Ribbit Capital, or non-profit organizations like Kiva and Mercy Corps.
At its founding meeting on Monday, October 14, Libra's Board of Directors also set up a five-person board of directors, including the Frenchman David Marcus, former boss of PayPal who became the head of Calibra, the subsidiary of Facebook. The secretary general of the association is also perfectly French speaking: it is Bertrand Perez, a Franco-Spanish, also passed by PayPal. At the micro franceinfo, the first justified in June the choice of the associative structure to manage this cryptocurrency.
We really think that if we create this 'internet of money' collectively, with all these other organizations, it can not be a network controlled by an entity or by a company, it must be a network of public utility.at franceinfo
Integrating the Libra association does not only mean making decisions in the board of directors: its members will also have to commit themselves to manage the computer network that will make cryptocurrency work. A reverse philosophy of other cryptocurrencies such as bitcoin, which allow everyone the opportunity to invest in the operation of its network. In the statement of intent of the project, the members of the association Libra however indicate wish to open to all the administration of the blockchain “in the five years after the public launch” cryptocurrency.
(Embed) https://www.youtube.com/watch?v=r5vXI1O4gtk (/ embed)
But it would compete with national currencies, right?
This is one of the biggest fears surrounding the Libra project. In front of OECD members gathered to discuss the challenges of cryptocurrencies, on September 12, the Minister of the Economy, Bruno Le Maire, has alerted his counterparts about the threats that “the possible privatization of a currency (…) held by a single actor that has more than 2 billion users on the planet” could weigh on the “Monetary sovereignty of states”.
With the project #Librathe monetary sovereignty of the states is at stake. In these circumstances, we can not authorize the development of Libra on European soil. #OECDBlockchain #Blockchain pic.twitter.com/gtCHDCeleY
– Bruno Le Maire (@BrunoLeMaire) September 12, 2019
On the side of Bercy, we confirm to take the subject very seriously. “With 2.7 billion monthly users (different applications belonging to Facebook)Libra could very quickly find itself in a position of predominance vis-à-vis certain national currencies, which could be squeezed out of everyday life “, explains to franceinfo the entourage of Bruno Le Maire. “This could deprive governments and central banks of major tools, such as interest rate changes, which would result in a loss of sovereignty.”
A diagnosis partly shared by Clément Jeanneau. “Facebook has found that bitcoin did not prevail in the general public, and the currency remained one of the few areas of daily life that had not fully digitized, says the co-founder of Blockchain Partner. He wants to rush into this breach to make Libra THE currency of the internet. “
Hard to imagine a future where the Libra replace our good old euros, explains Grégory Raymond. “The threat, however, may be real in countries hit by high inflation”, Warns the journalist, who cites the example of Zimbabwe or Argentina, where prices flew away 53.5% in the last twelve months.
If the Argentineans found that the value of the money placed in their bank account dropped by 30% in six months, they could of course turn to the Libra and its guarantees of stability.at franceinfo
Questioned by The world, digital currency economist Christian Catalini, who went on leave from the American university MIT to join Facebook, has calmed concerns by ensuring that countries shaken by an inflation crisis could put in place measures exchange controls to make the purchase of Libra more difficult for their nationals. It is tantamount to damaging the promise of a currency intended to help those excluded from the banking system.
Could the Libra be used for criminal or terrorist purposes?
The other fear concerns the possible use of the Libra for illicit purposes (money laundering, financing of terrorism …). “If the goal is to circulate funds via Facebook, where there is currently no real control of identity to create an account, there is indeed something to worry about”do we blame franceinfo for the Ministry of Economy?
Are these fears justified? No, answers Calibra. On its official website, the subsidiary of Facebook promises that it will ask its users for an ID before they can create an account. But other players will theoretically allow Internet users to create their online portfolio by being less observant. And the statement of intent of the Libra project specifies indeed that “the Libra blockchain works on the basis of pseudonyms “ and “allows users to hold one or more addresses that are unrelated to their real identity”.
Can we trust Facebook on the management of personal data?
The last major question related to the Libra project concerns the exploitation of personal data of future followers of this cryptocurrency. Or, to be more direct: can we trust a project initiated by Facebook, while the latter is barely recovering from the biggest scandal in its history, the exploitation by Cambridge Analytica data of tens of millions network users without their knowledge? Conscious of the mistrust which the group can be the object, the director of Calibra assured in June to Franceinfo that “the data on this network (Would) completely separated from Facebook's data “.
We have heard this demand from consumers, who do not want to see their financial data mixed with their social data or used for marketing purposes for advertising.at franceinfo
“After the recent scandals regarding the confidentiality of personal data, Facebook said they had better respect the rules of the game. We do not have to believe them but they will be very scrutinized on this point”, Temper Gregory Raymond. The journalist fears a possible relaxation of regulations on data protection in the long term, which could open the door to excesses.
It is for these reasons that large companies are withdrawing from the project?
Initially embedded in the Libra project, Visa, Mastercard, eBay and Stripe announced Friday, October 11 their withdrawal from the association, a week after PayPal, another Facebook partner in the operation. Most justified their choice by doubts about the project's ability to “fully satisfying all regulators' expectations “.
Because these companies have faced intense political pressure. As pointed out the specialized site The Verge (in English)At the beginning of the month, two American Democratic senators sent warning letters to payment behemoths who had joined Facebook in the affair. Their threats were barely veiled.
If you make your choice, you can expect a maximum level of vigilance from the regulators. Not only on your activities related to Libra, but on all those related to payment.in a letter to the leaders of Visa, Mastercard and Stripe
“One can understand that these companies do not necessarily want to be bothered because of a project on which they would have invested only '10 million dollars', analyzes Gregory Raymond. Especially that slamming the door of the project Libra allows these giants of the payment to be winners on all the tables. “They had a foot in at the launch of the project, which would have been very useful if the dynamics took, and they can leave the ship by striking a blow to the project after noting the opposition of states and financial institutions”adds Clement Jeanneau.
Will the announced deadlines be kept?
It is very unlikely, if not impossible. Scheduled for the first half of 2020, the launch of the Libra is now conditioned by the fact that the States and banking authorities are reassured by the project. “We are not a few quarters apart: if we need more time to finalize the answers we need to provide regulators to make a clean launch, then we will do it”, explained to Capital the secretary general of the association in mid-October.
And that's the rub. On the sidelines of the IMF and World Bank meetings in Washington on Friday, October 18th, Bruno Le Maire announced that France, Italy and Germany were working together on a series of measures to ban the Libra altogether in Europe. The day before, the G7 had already agreed that the sine qua non for launching this type of cryptocurrency was the establishment of a legal framework.
If the association Libra intends to comply with all international regulations, it will necessarily give up its initial promise, bet Clement Jeanneau. “US users will not be able, for example, to send Libra to Iranians or North Koreans, under the sanctions decided by Donald Trump: it is far from the commitment of a global digital currency that could bring people closer to the world. world, analyzes the specialist, who relies on a launch of Libra country by country before a progressive extension “good year bad year”.
I was too lazy to read everything, you give me a summary?
Welcomed with near-universal enthusiasm when it was announced by Mark Zuckerberg in June, the Libra is a cryptocurrency that was originally scheduled for launch in the first half of 2020. It aims to revolutionize online payments by enabling fast money transfers. , reliable and as simple as sending an emoji on the WhatsApp app.
To reassure consumers and authorities, Facebook has opened the governance of its project to many companies and non-profit organizations, and guarantees that the price of its Libra will remain stable, by backing it with a reserve of well-established currencies, like the euro or the dollar.
The social networking giant has so far failed to dispel the concerns of many countries, including France, who fear the fraudulent use of this new means of payment, or the destabilization of currencies hit by inflation. Facebook and its partners promise that nothing will be launched until regulators are reassured. But getting in line with the various global regulations risks seriously delaying the launch of the Libra, and compromising its initial promise.