This archive report was first published on 11 July 2019.
On June 18, Facebook announced its plans to launch Libra, a cryptocurrency that promises to revolutionize the way we transfer money. The implications of this move are far-reaching, and central banks must take notice.
Libra will enable instantaneous micropayments, something mobile money cannot achieve. This will disrupt the pricing and practicality of mobile money, making it cheaper and more convenient for users.
However, this also raises concerns about the regulation of data and the impact on privacy. The amount of transaction data at this scale will be enormous, and central banks must consider how to deal with the attendant currency fluctuations.
Facebook's Libra is not the first non-state actor to influence financial regulation. The Bank for International Settlements has been influencing financial sector regulation for years, but Libra is a classic example of the centralization of power in private hands.
Unless a new form of regulation emerges, the social implications of the disruption caused by Libra will be left with central banks and governments that are significantly weakened in the controls they can impose.
Central banks need to consider the potential impact on balance of payments, tax collection, and the regulation of data. They must also think about a new regulatory model that suits the development of cryptocurrencies like Libra.
On June 24, a Bill known as the Designing Accounting Safeguards to Help Broaden Oversight and Regulations on Data (or DASHBOARD) was introduced in the US Senate. If it passes, the Bill will force tech giants like Facebook to tell users how much their data is worth.
Libra makes the collection of this dividend possible, and Facebook should be paying its users a rebate the same way funds are transferred along the network. This transforms privacy from a human right to a service.
