Facebook's Cryptocurrency Foray - An Overview

Bambos Tsiattalou 2 October 2019

Facebook's Cryptocurrency Foray - An Overview

Cryptocurrency sceptics may scoff at what Facebook is doing but the push to develop its own currency shows how finance and technology continue to blur. This article considers the salient issues.

A few weeks ago controversy blew up over Facebook’s move to develop its own cryptocurrency, Libra, which adds to the debate over the social media giant’s market reach and the implications for consumer privacy. While around now for several years, cryptocurrencies are still a contentious subject, not least because of high market volatility. Some commentators doubt if an entity that is so choppy counts as money. 

To consider these issues - which have implications for the wealth management sector - is Bambos Tsiattalou, founding partner of Stokoe Partnership Solicitors. He specialises in cases involving money laundering, confiscation, civil recovery and extradition cases. The editors of this news service do not necessarily share all views of guest writers; to respond, jump into the debate and email the editors, contact: and

Facebook’s plans to introduce its own cryptocurrency have run into staunch opposition from some of the world’s most powerful nations. 

Facebook is the driving force behind the Libra Association, which last June announced plans to create a global digital currency. Facebook’s new subsidiary, Calibra, says it is building an app “built on blockchain technology to enable people to move Libra, a borderless cryptocurrency, freely, securely and affordably”.

The US Congress held two days of hearings into Libra in July. Maxine Waters, chairperson of the United States House Committee on Financial Services called on Facebook to halt Libra’s launch and development.

President Trump tweeted his views, saying “I am not a fan of Bitcoin and other cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air…Facebook's Libra “virtual currency” will have little standing or dependability. If Facebook and other companies want to become a bank, they must seek a new banking charter and become subject to all banking regulations”.

The German government is making efforts to prevent cryptocurrencies becoming a threat to state currencies. The German Finance Minister, Olaf Scholz, said that: “A core element of state sovereignty is the issuing of a currency; we will not leave this task to private companies.” 

The French Finance Minister Bruno Le Maire recently said that: “The monetary sovereignty of countries is at stake from a possible privatisation of money…by a sole actor with more than two billion users on the planet.” He also suggested that Libra could make money laundering and terror financing easier, saying that “we cannot authorise the development of Libra on European soil.” The Governor of the Bank of England, Mark Carney, said it would be approached with “an open mind but not an open door.”

Some fear that Libra will give Facebook even greater access to personal information. Senior data protection officials from the European Union, the US, the UK and other nations have raised privacy and data protection concerns about Libra. On 2 August, officials issued a joint statement saying: “Many of us in the regulatory community have had to address previous episodes where Facebook’s handling of people’s information has not met the expectations of regulators, or their own users.…To date, while Facebook and Calibra have made broad public statements about privacy, they have failed to specifically address the information handling practices that will be in place to secure and protect personal information.”

Resistance to Libra is widespread. Banks are concerned, but perhaps largely due to self-interest reasons, since Libra may eat into their business and affect currency exchange. Amongst the many critics of Libra, there may be many vested interests, who are simply reluctant to give up longstanding positions of privilege.

Cryptocurrencies have come a long way since the introduction of Bitcoin a decade ago. Bitcoin was notoriously volatile, and was not linked to any underlying real assets. Libra, by contrast, is conceived as a “stablecoin” which would be backed by a basket of strong currencies at a 1 to 1 ratio. The cryptocurrency’s backers have said they would welcome regulation to give the public confidence that this ratio is maintained.

David Marcus, CEO of Calibra, recently entered the fray on social media to “debunk” the idea that “Libra could threaten the sovereignty of nations when it comes to money.” He argued that Libra was not going to be a new currency, but merely a “better payment network and system running on top of existing currencies”. He said the creation of money will “strictly remain the province of sovereign nations”. Mr Marcus stressed that “for any unit of Libra to exist, there must be the equivalent value [of currency] in its reserve.” 

Yet if Libra truly is a payment mechanism, and not a new currency, then it may have been wiser not to trumpet it precisely as a new “global currency” at its launch.  A new “global payment network” may not have met such resistance.

The internet has no single regulator, and many tech and finance companies are now wealthier than entire nations. Facebook is the leading player behind Libra, but it is not alone. Other companies involved in the Libra Association include Mastercard, Vodafone, Spotify and Visa.

Such influential companies may well manage to launch a digital “payment system” that becomes a de facto global digital currency. If Libra is ultimately launched in June 2020, in spite of such powerful opposition, it will tell us a lot about where the real power now lies in our global digital economy.

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