Facebook’s bold currency play was sure to cause jitters

The new company logo for Facebook

“Currency crises are nothing new,” notes a recent paper on digital currencies by the US National Bureau of Economic Research.

“The history of money … suggests that there will always be a demand for a non-state currency that serves as a check on the inflationary monetary tendencies of the sovereign. Should that demand persist, it is likely that some private decentralised digital currency will continue to exist.”

Facebook’s 2019 foray into the world of finance, with a Silicon Valley twist, has been both bold and brash.

The cryptocurrency offering by the world’s largest technology company seems almost a breath of stability after the rise of Bitcoin, a volatile, stateless digital currency created a decade ago by an anonymous coder, or group of coders, which rose 18-fold in value before crashing violently last year then surging again.

Bitcoin is the most famous cryptocurrency, an application of blockchain technology that is a decentralised public ledger that records peer-to-peer transactions in a system guarded by complex cryptographic computer code.

In the madness of Bitcoin, millions of unwitting retail investors were strangely coaxed into a currency the vast majority of businesses did not accept, and with a store of value few institutions recognised. Still, it sparked the creation of more than 1000 other cryptocurrencies now in circulation.

They all promise a similar thing: to be a futuristic medium of exchange, enabling transactions without the need for a central bank or government.

Mark Zuckerberg’s company has already been implicated in ­numerous consumer privacy scandals. It is accused of undermining democracy, allowing tyrants to overthrow governments, not to mention presiding over the proliferation of “fake news”.

When it comes to Libra, the US Federal Reserve has demanded the project be reined in. European governments are attempting to kill off the plan. It’s little wonder that Australian regulators are also chasing up their own concerns.