Forcing Libra to Change Its Business Model
It’s been two months since Facebook’s Libra was revealed to the cryptocurrency markets & the worldwide public. Since then, the global financial markets have been shy of a meltdown. When you search up Facebook Libra, it shows sixty thousand results. Multiple articles are posted hourly about Libra, indicating that the world is concerned about what’s to come. For sources that disassociate with fake news, the main concern is privacy and the unease it’s creating on a global scale. Facebook already could influence people’s behaviour in the past; they don’t need to be able to change the worlds financial growth as well.
The concern for Facebook’s Libra is so extreme that in May 2019, one of the founders of Facebook spoke openly with the New York Times. He claimed that social media conglomerate should be broken apart. The founder’s remarks echo the same statements that have been said by Democratic politicians, such as Elizabeth Warren. The US Government disapproves of Libra & wants to break it up before it affects financial markets.
Dismantling Facebook is Useless
Elizabeth Warren’s comments represent an issue that concerns the entire population of the USA, a concern to stop the company from becoming too large before things reach a level that can’t be stopped. However, dismantling Facebook won’t resolve the problems at hand. Libra is going to be free to access, and just as with any free internet service, a company relies on the user’s data to appeal to advertisers and earn a profit. The more data collected; the more advertisements swarm our daily lives. These ads are often tailored to personal interest. When it comes to Libra, it could mean that your financial purchases with Libra will be tracked and related advertisements will appear on social media news feeds.
Facebook doesn’t want to steal the private information of consumers and sell it to advertisers. Facebook also is interested in keeping consumers with its platform by offering unique services and special features. However, this is a secret ploy to keep you scrolling through your news feed until an advertisement pops up. The strategies implemented by Facebook to ensure that consumers remain with their platform is reminiscent of a casino. They get people hooked on their platform by offering fun games like Farmville or by having friends be able to like photographs. These simple tactics are addictive and have kept people with the platform for more than a decade.
The Facebook Business Model
Facebook wouldn’t be able to stop a dismantle if national agencies worldwide forced them. Back in the early 1900s, the Standard Oil Company was broken apart into thirty-four different companies after the United States government declared them to an illegal monopoly. The company owned nearly every oil factory in the United States, causing for any other business entering the oil market to be immediately whipped out. The same could be the case if Libra is to become a monopoly; all other global digital currencies wouldn’t hold any value.
If the United States Government were to break apart Facebook into multiple companies, each entity would use the same business model and continue to take data from consumers. This is what consumers fear the most, is that these companies won’t stop no matter what the governments do or say. Regulators should remember how Facebook has operated in the past and that this same business model will be enacted with Libra.
Most consumers aren’t aware of the power that Facebook holds in their possession. By manipulating its users and collecting their data, the social media giant can know almost every aspect of your life. This applies to your favourite foods, movies, books and political views. The last one is the most important, as studies have shown that the social media giant could easily influence the opinions of elections across the world. Many political analysts have claimed that Facebook has already committed this atrocity.
Researchers with Stanford University showed that if Facebook merely placed an image of a political candidate on their Facebook, more than 340,000 US Residents would be more likely to vote for that candidate come election day. These sorts of capabilities are terrifying, as a company can easily influence the outcome of global events today. If Facebook were to reach this same power in financial markets, then the company would most likely use their abilities to influence consumers to purchase products via their newsfeed. By selling products, owning the currency, getting money from advertisers, and operating the social media platform where it all takes place, Facebook will create a financial monopoly.
Take from the ESMA
These monopoly concerns should be top-priority for worldwide regulators. The difficulty is informing the people of Facebook’s wrongdoings; to this day, most aren’t aware that Facebook collects their user data. Instead, financial regulators can take note from the European Securities and Markets Authority. Thirteen months ago, the ESMA released product intervention measures that forced Forex Brokerages across the European Union to alter their business models. Regulators of Libra could enforce the same form of guidelines, which would cause Libra to obey a strict financial code of conduct.
When the ESMA released their product intervention measures, the casino-like tactics that Forex Brokerages were using immediately stopped. It forced these brokers to stop recommending the highest leverage points possible for clientele. Brokerages implored these tactics for nineteen years. The need to stop Facebook’s “Gamification” of their products and services are immediately required, or else a two-decade-long process of illegal activities could begin shortly.
The idea for these brokerages was that the higher the leverage offered, the easier it would be for clients to get rich. However, it would be rare for the leverage to ever work out in favour of clients. Analysts suspect that Facebook will implore “Bonuses” with Libra, allowing consumers to earn more Libra Coins if they use a particular service or purchase a specific product. The more libra coins you have, the more productive you feel. That’s what Facebook wants consumers to believe. Furthermore, just like an online casino, Facebook has used fast cars and provocative women to advertise their services. The culmination of these tactics needs to be terminated immediately.
Many in the Retail Forex Trading Industry are concerned that Libra will outpace the likes of Ethereum, Litecoin, Bitcoin, Stablecoin & many other digital currencies. Facebook could not just be creating a new market for themselves but destroying a different market that has earned billions in the last decade.
Facebook Going Down
Apart from the United States of America and India, there haven’t been many nations that have expressed their disapproval of Libra. Most governments are merely demanding that Facebook take the safety of consumers more safely and creating regulation that the social media giant will have to follow. Implementing legislation like the ESMA will take away a significant portion of the concerns revolving Libra, but those regulations most likely won’t be enacted globally. European clients are already protected from Libra by the General Data Protection Regulation Act, which was introduced in 2018.
Mark Zuckerberg’s goals for having an unregulated digital currency that could be run entirely through Facebook won’t be realised. Each country worldwide is going to have some regulations or guidelines that influence how Facebook can maintain Libra. We can only hope that the legislation enacted will be equivalent to the ESMA Product Intervention Measures.