Sensing a multi-billion dollar opportunity to improve the cross-border payments system, Facebook is launching its own digital coin called 'Libra' next year which is set to run into rough weather with several governments, including India, not treating cryptocurrencies as legal tender.
Also, read: Facebook unveils its digital currency 'Libra' coming in 2020
The move to launch 'Libra' comes at a time when Facebook is under intense pressure from regulators, shareholders and users to address privacy shortcomings.
The social networking giant with over two billion users globally, is facing regulatory challenges as the Cambridge Analytica scandal has exposed its lapses of data privacy and security.
According to senior Forrester analyst Aurelie L'Hostis, now that Facebook is reaching out to financial firms and payments service providers to join the Libra consortium to help them launch their cryptocurrency-based payments system, we can expect regulators and governments to raise questions regarding Facebook's financial data collection and management process.
"By launching its own cryptocurrency, Facebook is essentially creating its own shopping ecosystem where consumers and businesses will be able to buy and sell products on its platforms without having to use web payment systems like PayPal," L'Hostis said.
However, the move is set to see some intense scrutiny as there is huge trust deficit with Facebook.
Facebook has been making inroads into financial services, having applied for a EU "e-money" license five years ago in order to let users use Facebook to pay and exchange money with others on the platform.
According to Meng Liu, another analyst with Forrester, the Libra vision sets up a series of massively complex challenges.
"A cryptocurrency being used by 2.7 billion people across the globe would be a threat to national sovereignty and disruption of their ability to coin money.
"China, Indonesia, and Pakistan have already banned Bitcoin and other cryptocurrencies due to similar threats. The US, France, and Russia have now all expressed concerns regarding the threat that Libra would represent," said Liu.
Though cryptocurrency itself is characterized by anonymity, the digital platforms that consumers use to make payments will be based on WhatsApp, Instagram and Facebook.
"The Cambridge Analytica scandal exposed egregious missteps by Facebook -- and users haven't yet forgotten that breach of trust," Liu added.
'Libra's' documentation indicates that it has strengthened its data privacy protection mechanisms, but this will unlikely be enough to assuage deep concerns when it comes to Facebook's ability to govern such a system and currency.
Also, read: Facebook to pay Android users in India and the US to monitor their phone usage
