NYU professor warns of Facebook’s cryptocurrency plans
NEW YORK — “Mild horror” is an appropriate reaction to Facebook’s cryptocurrency plans, says Scott Galloway, a marketing professor at NYU’s Stern School of Business.
“We are rightfully concerned,” Galloway told CNN’s Julia Chatterley on “First Move” Monday morning, in a discussion also about his new book “The Algebra of Happiness: Notes on the Pursuit of Success, Love, and Meaning.”
“To take over society is three legs of a stool: First you get control of the media, then you get control of the money and that leads to control of the military,” Galloway added. “Facebook has not done a great job of taking control of the media … Do we really want to give them control of the economy and our money right now? Buyer beware.”
He criticized Libra, a digital currency Facebook announced last month that will be managed by the independent nonprofit Libra Association in Switzerland, to grow Facebook’s power and influence. That’s something regulators and others were worried about even before the Libra announcement, as Facebook has come under fire for issues like its failure to protect user data and foreign actors’ use of the platform to interfere in the 2016 U.S. presidential election.
Facebook’s 2.4 billion users around the world positions Libra to be adopted by a much wider audience than other cryptocurrencies. This could mean Libra has a shot at becoming a new default currency like the dollar or the euro, Galloway said, which could have serious implications for the global economy because it would not be managed by a central bank like traditional currencies.
“We could have the mother of all negative unintended consequences if we let Facebook establish the new default currency,” said Galloway, who is also the author of “The Four: The Hidden DNA of Apple, Amazon, Facebook and Google,” about how Big Tech companies became so powerful and deeply ingrained in daily life.
Facebook, however, has said Libra will be backed 1:1 by a reserve of stable currencies overseen by the Libra Association. The company has also said it is working with regulators on the cryptocurrency’s rollout, and that it has plans in place to protect Libra users’ data.
Galloway called on regulators in the United States and globally to respond to Libra. He added that if anything goes wrong with the project, it will not be Facebook’s fault — but the fault of regulators not reacting appropriately and customers who buy in anyway.
Leaders around the world have already begun to speak out with concerns about the project and American lawmakers have planned two hearings on Libra next week, where Facebook executive David Marcus has said he plans to testify. House Financial Services Committee Chairwoman Maxine Waters of California and other Committee Democrats sent a letter last week asking Facebook to immediately halt development of Libra while it examines the project further and considers regulatory action.
The company has not said whether it will comply with the lawmakers’ request, but Facebook did release a statement: “We look forward to working with lawmakers as this process moves forward, including answering their questions at the upcoming House Financial Services and Senate Banking Committee hearings.”
Galloway said lawmakers have thus far done a poor job of regulating Facebook, and that Libra is a chance to course-correct. He also blamed users who have remained on the platform despite its missteps.
“I think you’re naturally seeing what I would call a well deserved and well earned gag reflex around this idea,” Galloway said. “They’re trying to do everything right: Set up an independent body in Switzerland, make it a nonprofit. But there’s one problem … it comes from Facebook. And people just are like, ‘Burn me a million times, shame on you, burn me a million and one times, shame on me.'”
Beyond regulating Libra, Galloway also spoke about rising calls from politicians, competitors and others to break up Facebook and fellow Big Tech giants Amazon, Google and Apple. Federal regulators in June divided up oversight of those companies between the FTC and the Justice Department, paving the way for potential investigations into antitrust violations.
Galloway said he thinks breaking up those companies is not only the “right thing” to do, but it would also be good for the economy.
“WhatsApp, Instagram, YouTube would all be amazing, independent companies,” Galloway said. “If you look at all the big breakups in the past in our economy, three to five years post-breakup, the companies are worth more disaggregated. So these stocks are going to skyrocket once breakup actually becomes a reality.”
That would mean happy investors and, in companies like Facebook and Amazon where executives control much of the stock, CEOs like Mark Zuckerberg and Jeff Bezos ending up even richer.