Facebucks are the last thing the world needs

Facebook money – Libra – is it funny money or a threat to all currencies? Or is it just a giant scam to transfer people's money to Facebook?

The motto proposed by Facebook, Libra – or, as NPR says, Facebucks – has created a storm. Libertarians see Libra, a variant of a cryptocurrency backed by Facebook's money and the many companies it has created, evoking the day when crypto-currencies will truly challenge all world currencies and realize the dream of the economist Friedrich Hayek from: Denationalization of money. Or maybe, as Hacker Noon tells Erasmus Elsner: "Facebook has found a place to park its $ 40 billion cash reserves and everyone thinks that [sic] about Crypto "- a clever way to receive free money without paying interest and park it wherever you want.

In the White Paper of Libra are a few sentences saying that Libra will also enable a global digital identity for people (read: a global Aadhaar). All this since Facebook, which is under fire from critics for massive violations of privacy. From a platform that literally extorts its users from visibility, the "real" motto of the narcissistic digital era: If you want your messages to be seen, pay us.

It is not my intention to look closely at Libra. Instead, I will focus on what is the money, not in theory, but in practice. Money is what we use for transactions; that's what we put in a bank – or under the mattress – if we want to tidy it up. In simple terms, it is both a means of exchange and a store of value. It derives its legitimacy as one or the other. The state supports him; the guarantee is on every ticket of the central bank of the state. All other forms of "money", for example the one used by Alibaba – Alipay – or Paytm – derive their value from central money and are held in what we can call the "digital wallets" that we keep with these companies.

Most people see these portfolios as temporary storage for real money that can be used to make mobile payments. In China, most people use WeChat or Alipay for payments, even the small ones. Cash transactions and the use of credit card payments are declining in China, which could also occur in different parts of the world.

Facebook's Balance is trying two things simultaneously. It challenges all global currencies because it will be possible to make payments in the Facebook ecosystem without using specific currency. It is a currency guaranteed by a private company, not a government. The same goes for any control of money by governments Of course, Facebook uses cryptocurrency as a substitute for the sovereign guarantee that each state extends its currency. But let's be clear: the credibility of Libra or Facebucks lies in the fact that it is supported by Facebook, not its cryptography algorithm.

Of course, the real world is not so simple. Yes, no country will be able to regulate Facebook's money. Except the United States. Let's not forget that Facebook is an American company that operates under US law. It is subject to the same laws as those applicable to US banks. Remember when US sanctions were imposed on Iran and all its money in US banks – and even outside the US – was seized by the US? In fact, the return of these sums of money is a part of the Iran-United States. Global Agreement on Comprehensive Action Plan (JCPOA), a part that Trump has reneged on. So, let's not kid ourselves. Facebook's money will not be under the legal control of any government except the United States.

The second part is with 2.27 billion users. Even if a small number of them "buy" Facebucks to put their Balance digital wallet, Facebook will sit on a huge amount of cash. This way can add a very large sum of money to its $ 40 billion of cash reserves. Facebook does not keep a safe in its safes at its headquarters in Menlo Park, California. Or at the bank gaining lean interest. Or in search. He uses this huge stack of cash as a hedge fund and giant investment. By buying Libra, Facebook users will increase this stack of cash for Facebook. We buy fun money to play in the Facebook fair; and Zuckerberg gets real money to play in the real world.

Facebook claimed that his Facebucks would allow those excluded to enter the financial system; they introduce their version of money to help the poor, not pocket pockets of Facebook. Most people are aware of the true "altruism" of Facebook: it has become one of the richest companies in the world and Mark Zuckerberg is one of its wealthiest citizens. In India, we already know Facebook's speech on "helping the excluded" during their Free Basics campaign. It is unlikely to cut ice here. But it can still have some influence in countries that believe Facebook is the Internet. Or among people who use the Internet largely for Facebook.

So, the key questions: Does Facebook introduce the world's first money that is not supported by a sovereign or sovereign state? Or is it a giant scam to start a bank without any regulation? Or currency controls? Can states that allow Facebook to do so still control the monetary side of their economy?

For China and the United States, the problems are quite simple. In the United States, Facebook is under its jurisdiction and will have to obey any existing regulatory framework in that country. For China, again, it's pretty simple. There is no Facebook in China. They do not need to control Facebook and can regulate WeChat and Alipay, the two mobile wallets of the company.

With the exception of North Korea, Iran and Russia, which are already subject to US sanctions, the rest of the world has the problem. In these countries, will regulators ban money from Facebook? Or will Facebook users, more numerous today than the population of any country, be able to force their governments to go to Facebook? This is the great battle that is getting ready in the financial world.