Will anyone trust the Bank of Facebook?
Privacy and regulatory issues trouble Facebook’s cryptocurrency launch.
a battle to win the public’s trust after announcing plans to launch its own banking service based on a new cryptocurrency.
Facebook plans to launch the Libra global blockchain currency next year under the guise of a subsidiary called Calibra, with wallets available for WhatsApp, Messenger and via a standalone app.
However, the company faces many hurdles before launch, with watchdogs already worried over the risks of Facebook combining data from its social network with transaction records. “I’m definitely concerned about Facebook correlating all your spending behaviour with your identity,” Justin Brookman, director of privacy and technology policy at rights group the Consumers Union, told PC Pro.
Facebook went to great lengths to stress that it would keep financial and user account information separate, pledging a fire gap between the two strands of its business. “Aside from limited cases, Calibra will not share account information or financial data with Facebook or any third party without customer consent,” it said. “This means Calibra customers’ account information and financial data will not be used to improve ad targeting on the Facebook family of products.”
But, given Facebook’s track record, the promise is not seen as credible by critics. “They say they won’t do that without consent, but Facebook has a terrible history of using manipulative interfaces to simulate consent,” Brookman said. “Until regulators demonstrate that they’re willing to contest coercive interfaces, Facebook will allege that it has consent for pretty much whatever it wants.”
Facebook is going to some lengths to convince the public it can be trusted with their money. “We’ll be using all the same verification and anti-fraud processes that banks and credit cards use, and we’ll have automated systems that will proactively monitor activity to detect and prevent fraudulent behaviour,” Facebook stated.
Yet Brookman fears that simply using bank-like verification systems won’t protect end users if things go wrong. “In the US, transactions based on cryptocurrencies are less protected than, say, credit card transactions, where you are protected against fraud and there are error resolution and dispute rights,” he said.
“Coins aren’t backed up by the Federal Reserve like bank deposits are. So yeah, they’re asking for users to trust them a lot, and given their history I think they’ve got a lot of barriers to overcome.”
Official bodies have also expressed fears over how the currency could be used, with concerns it could become a “shadow bank”. French finance minister Bruno Le Maire, for example, said it was “out of the question” that Facebook should be allowed to set up a currency, which he suggested could be used for shady transactions and could unbalance global markets.
Currencies were “an attribute of the sovereignty of states” and should “remain in the hands of states and not private companies which answer to private interests,” he said, while US officials urged Facebook to put the proposal on hold.
Calibra will let users send funds to almost anyone with a smartphone, with plans to add contactless payments at a later date.