Facebook’s plans to launch a global cryptocurrency have been met with a swift and justifiably wary reaction from regulators around the world. The US Congress’s House Financial Services Committee wrote an open letter to Facebook calling for a halt to further development of Libra until US lawmakers have had more time to consider its implications, while regulators in the UK said that the proposal needs ‘deep thought and detail’. In Australia, Reserve Bank Governor Philip Lowe expressed scepticism, highlighting the many regulatory issues which need to be addressed.
Critics have expressed concern about the potential for a globally successful Libra currency to effectively transfer vast amounts of power over everything from monetary policy to the application of laws and sanctions away from national institutions to unelected multinational corporations, and that this risks eroding core principles of democracy and national sovereignty.
These are important points. But there’s another, less obvious but perhaps equally significant, way in which Libra could be used—in fact, could be actively weaponised—against democratic rights, by undermining the ability to protest.
Internet shutdowns are becoming an increasingly common tactic for governments looking to quash protests and dissent around the world. In 2018, NGO Access Now documented 196 internet shutdowns in 25 countries, primarily in developing nations in Africa and Asia. In the past month alone, governments have partially or entirely shut down the internet in response to post-election protests in Mauritania, unrest and conflict in Myanmar, pro-democracy protests in Sudan and people protesting against lynchings and the death of a man in police custody in India.
Facebook has been working extremely hard to market Libra as a solution for the world’s unbanked and under-banked populations, ‘virtually all’ of whom live in developing countries according to World Bank research in 2017. Facebook also appears to be targeting users in developing economies who already have access to the traditional financial system but are seeking cheaper alternatives, particularly for international transfers and remittances.
Imagine, then, a situation in which Facebook gets everything it wants for Libra in a hypothetical developing nation. Thousands, perhaps millions, of people who previously had no access to financial services and kept all their money in cash start transacting in Libra instead. Libra becomes the dominant method of exchanging value among ordinary citizens, particularly people at the low end of the socioeconomic spectrum for whom Libra is more affordable than the traditional financial system.
Many people who haven’t had access to banks stop keeping their savings in cash, instead converting their life savings to Libra and storing it in Facebook’s Calibra digital wallet, where they believe it will be safer than under the bed. Others choose to move their money out of bank accounts and into Libra, perhaps because they don’t trust their own government or because their national currency is highly unstable. Small businesses, individual traders, even employees begin accepting Libra as their main form of payment. People start making and receiving small loans and other financial services in Libra. A grassroots economy begins to flourish built on the back of this digital currency.
And then some part of the community does something the government doesn’t approve of, like protesting to protect their rights, and the government shuts down the internet.
Internet shutdowns in the past have lasted for months at a time, notably in Cameroon in 2017. India leads the world for the most internet shutdowns, with 59 in the first half of 2019 alone. Almost half of India’s internet shutdowns are in the restive region of Jammu and Kashmir.
Protesters can last a long time without access to Facebook, but how long can they last without access to their own money? How long would they hold out, as they watch their neighbours’ businesses suffer and their elderly parents be cut off from their retirement savings? What comes first, democratic principles or the ability to pay your rent and buy food for your children?
The government would have plenty of time to wait the protesters out. It seems a reasonable assumption that governments, government services, the military and security agencies would continue to operate in their nation’s sovereign currency and be relatively unaffected by cutting off access to Libra. It might be an inconvenience to the nation’s wealthy and powerful, if they conduct some transactions in Libra. But they will probably have significant wealth stored in the traditional financial system, so they won’t be cut off completely.
If Facebook is right and it is the world’s poor and marginalised who have the most to gain from Libra, then it’s also the world’s poor and marginalised who are most at risk from losing access to it. A highly successful Libra project would effectively hand governments a financial kill switch that they could flip with minimal damage to themselves, but with potentially devastating effects on those opposing them.
It’s important to grapple with the ways in which Libra has the potential to undermine the power of governments, but it’s also important to think about the ways in which an enterprising authoritarian government, or even a democratic one, might find ways to twist Libra to its advantage. Internet access is already being wielded as a weapon by governments seeking to silence dissent or crack down on their people. Fostering dependency among poorer and more vulnerable communities on a cryptocurrency would make that weapon all the more powerful.