Facebook just announced a Facebook cryptocurrency called Libra.
To me, the timing seems impeccable — Facebook could not have chosen a worse time. Just when consumers and regulators have realized how much Facebook knows about its users, how eager it is to monetize that information, and how little it cares about complying with laws along the way, Facebook announces that it intends to extend its reach into the bank accounts of users as well.
Nothing to worry about there, right?
A few thoughts:
- Not long ago, some predicted that cryptocurrencies would lead to a better world, a world that would be more free, more decentralized, where consumers could interact with one another without middlemen. Libra promises exactly the opposite.
- It didn’t take long to get from there to here, but the arc itself is typical of technologies, from radio to automobiles to the internet. We expect technologies to save us, then they don’t.
- Are tokens securities? Does Howey apply? Facebook’s announcement shows that those questions are small potatoes in the scheme of how cryptocurrencies may re-shape the financial world.
- Undoubtedly, Facebook is in this for the data. Will consumers care? Probably not.
- Facebook might be first, but how long can it be before Google and Amazon — especially Amazon — issue their own cryptocurrencies?
- Regardless of political persuasion, governments aren’t going to allow Facebook or anybody else to compete with their national currencies. Expect serious opposition and regulation, from Democrats and Republicans alike.
- And the next step: How long can it be before the U.S. dollar itself is given the features of a cryptocurrency, in effect competing with Facebook?
- The price of bitcoin increased on the announcement, but I think that’s exactly wrong. The announcement shows that bitcoin and other cryptocurrencies will be left behind as big companies take over, just as a few big companies now monetize the once-egalitarian internet.
- In the same way, I expect the announcement to stifle innovation in the cryptocurrency industry generally, just as Facebook is already stifling innovation in social media. Who wants to compete with the giant?
- I’m looking forward to seeing Mark Zuckerberg appear before the Senate Finance Committee and say “Trust me.”
As all six readers of this blog know, I’m a believer in Crowdfunding from a capitalist, ideological perspective. I believe in making capital available to entrepreneurs everywhere, no matter where you grew up, no matter who your parents are, and in making great investments available to ordinary Americans, helping to narrow the wealth and income gaps that do so much harm to our society.
Frankly, Facebook and Libra feel like a step in the opposite direction, toward a world where knowledge and wealth and power are more concentrated and ordinary Americans are so many data points to be monetized. I’m certainly interested in hearing a different point of view.
Questions? Let me know.
Mark Roderick is one of the leading Crowdfunding lawyers in the United States. He represents platforms, portals, issuers, and others throughout the industry. For more information on Crowdfunding, including news, updates and links to important information pertaining to the JOBS Act and how Crowdfunding may affect your business, follow Mark’s blog, or his twitter handle: @CrowdfundAttny. He can also be reached at 856.661.2265 or email@example.com.