“The question that has been motivating us is: Can we do for money what the internet has been doing for information?,” said Kevin Weil, co-creator of the Facebook-led digital currency Libra and VP of product for Facebook subsidiary Calibra. “The financial system feels a little bit similar to what the telco system did 25 to 30 years ago — it’s a relatively closed system, high barriers to entry, not a lot of competition, it’s tough to innovate, and it’s expensive for people.”
This has emerged as a core part of the prevailing Libra narrative, as Facebook looks to convince the world that a new “decentralized,” digital financial system led by Facebook is a good idea. Building on a theme proffered previously by Calibra head David Marcus, Weil took to the stage at Web Summit 2019 today, using the open internet’s historical impact on communications and information-access to explain why Libra is a potential game-changer for the finance industry. But what’s perhaps most interesting about Facebook’s approach here is that the analogy it’s using to convince people on Libra is the antithesis of what Facebook has built its entire business upon.
The story so far
Back in July Facebook announced controversial plans to spearhead a new digital currency called Libra, underpinned by a host of partnerships spanning technology, payments, telecommunications, venture capital, and more. The ultimate plan is to create an alternative blockchain-based financial system that bypasses traditional banks to lower the costs for transferring money online and “lower the barrier” to entry for businesses. In tandem, Facebook is also developing Calibra, a digital wallet built on Libra’s infrastructure.
But Libra has gotten off to a shaky start. In the past month, a number of high-profile companies departed the project, with the likes of PayPal, Mastercard, Visa, Stripe, and eBay all jumping ship. And despite growing criticism from lawmakers around the world that Libra could aid money laundering and disrupt the entire global financial system, Facebook is going full-steam ahead with its Libra and Calibra plans.
By anyone’s estimation, Facebook faces an uphill battle to convince people that Libra is the answer to solving global digital payments. Not because the idea itself is terrible, but because the project is being driven by Facebook, a company with a less-than-stellar track record in terms of earning consumers’ trust and lack of “openness.” And that is why an analogy that aligns the modern financial services industry with the telecom industry of yore is problematic — the argument itself is fine, but Facebook making the argument isn’t.
Weil correctly pointed out that modern digital wallets such as PayPal, Square Cash, or Zelle are not interoperable. “If you use one, and I use the other, we can’t actually send each other money,” he said. “That’s not the way the world should work — the way Libra will work, the way that services built on Libra will work, will be much more like email. You and I don’t have to collaborate on which email provider we’re going to use before we send each other an email.”
In other words, email is an open system, and it constitutes common protocols. Regardless of whether you use Gmail, Outlook, ProtonMail, or Yahoo, email users can freely send messages between the respective services. The same goes for SMS, given that people can send text messages to anyone anywhere in the world, regardless of their network (though fees do apply). What Facebook and its ilk do, on the other hand, is create closed communication silos and walled gardens — WhatsApp and Telegram users can’t send each other messages, while Facebook and Twitter users can’t communicate directly with each other either. When you consider its other products, such as Workplace by Facebook, it soon becomes clear that Facebook — among many others in the space — has contributed greatly to the web’s shift toward a closed silo.
This is neither an earth-shattering revelation or a direct criticism of Facebook’s business. But it highlights how disingenuous Facebook sounds as it talks up open internet standards to benefit its arguments around Libra, when for the past 15 years it has systematically worked to build its own proprietary world on the internet.