Facebook’s Libra Is a Good Idea With a Lot of Risks

(Bloomberg Opinion) -- Say this for Facebook Inc.: It doesn’t lack ambition.

This week, the company unveiled plans to issue a digital currency, called Libra, sometime next year. Using a blockchain-like data system, and anchored by a basket of low-risk financial assets, its ambition is to be bitcoin without the problems. Or, as Facebook modestly puts it, “a simple global currency and financial infrastructure that empowers billions of people.”

Actually, the goal seems to be a bit more grandiose. Extend the company’s logic a bit, and Libra looks like an attempt to compete with — and perhaps supplant — currencies of the traditional kind.

Would that be a good thing?

In the optimistic case, Libra will simply add to growing competition in the money-moving business. It should offer faster, cheaper and less irritating transactions. It might make life easier for small businesses, advertisers and anyone wanting to buy a product online. It could be of particular value to the poor, who could accept payments, pay bills, or make remittances more cheaply and without need of a bank account. And it might lead to useful financial innovations down the road.

These are all characteristics of digital currencies more generally, and to the extent Facebook’s effort gets people comfortable with the idea it should be welcomed. The benefits of widespread cashlessness could be profound.

That said, this particular endeavor raises some concerns.

One is Facebook itself. Mark Zuckerberg’s colossus has spent much of its brief existence apologizing for one grave corporate misdeed or another. Users will no doubt pause before leaving their intimate financial data in its vicinity, the company’s assurances notwithstanding. Libra’s unusual architecture, in which Facebook will cede operational control to a consortium of other companies and outside groups, isn’t entirely reassuring.

Combining this unfortunate reputation with the chaos that traditionally adheres to digital currencies, moreover, could be a recipe for disaster. Facebook will need to offer more convincing plans to combat money laundering, theft, fraud, hacking and other vices of the internet age. Lawmakers, who so far haven’t greeted Libra with unalloyed enthusiasm, already want to discuss antitrust concerns, financial stability, privacy, data handling, compliance and so much more.

Their skepticism is, of course, warranted. But they should tread carefully nonetheless. Digital currencies, still in their infancy, have immense potential to help businesses, boost growth, and improve lives. Unduly clobbering Facebook — however satisfying — could stifle that revolution before it really begins.

Editorials are written by the Bloomberg Opinion editorial board.

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