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Is Facebook’s Libra a new threat to our privacy?

Not only does Facebook gather mountains of data about your private life, they now want to track your spending habits and control your money as well. Meet Libra, Facebook’s new cryptocurrency. It promises a more stable transaction method, but there are good reasons to be skeptical.

Is Facebook’s Libra a new threat to our privacy?

What is Libra?

Libra is the new crypto-currency being developed by Facebook.

Libra is a stablecoin, which lies somewhere between crypto- and standard currencies. Unlike cryptocurrencies, it is backed by asset reserves (bank deposits, short-term government securities in currencies, etc.).

This connection makes it more stable. However, unlike other stable coins, it won’t be tied to any particular currency. That would make Libra more universal, and it wouldn’t depend on the fluctuations of a single currency.

How does it work?

The cryptocurrency is managed by the Libra Association. This means that, unlike Bitcoin, only the Libra Association can mint the currency – it can’t be mined by anyone. Only entities meeting the set requirements can be part of the association, though this may change later. Thus, Libra is a more centralized and less-liberal cryptocurrency and is tied to a single organization.

Major issues and threats

There are some major concerns over Libra:

  • For Facebook, privacy does not exist. Critics are virtually certain that it will be used as a tool for mining private data. They will know not only where you’ve been and what you’ve done, but also your spending habits and transactions;
  • You can only use Libra to buy items sold through Facebook or its associated apps. To shop elsewhere, you have to convert it to cash. Thus, it is a closed-circuit system, with Libra only circulating within Facebook’s domain;
  • Facebook will most likely try to push Libra to its existing users to turn its vast user base into Libra users. Thus, FB users might be shut out of features if they don’t use Libra;
  • Due to blockchain procedures, transactions are way slower than bank transactions;
  • Libra will be a great tool for scamming, hacking and money laundering. Due to its potentially large amount of users, this could happen on a larger scale than in other cryptocurrencies;
  • As per Facebook’s recently released white paper, one of Libras main targets is unbanked populations. It includes people, which cannot use bank services due to inaccessible services in their country or socio-economical situations. To achieve this Libra will have to penetrate the markets of developing countries, and it will be an additional challenge to convince people to use their currency and trust them. In other targeted countries with significant unbanked populations such as China, there is a formal ban on Facebook. Thus, it is still an open question, how Facebook will manage to reach some of its target audience.

Many questions are still left to be answered, and with Facebook’s recent misdemeanors, Libra looks more threatening than promising.

Moreover, recently, North American privacy and consumer watchdogs have asked the US Congress to freeze the project, fearing its effect on the global economy and the unbanked population as well as questioning its transparency issues. The US Congress complied with their request and has asked Facebook to suspend the development of Libra until lawmakers could investigate these issues further.

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