Facebook, now Meta Platforms, has just announced its cryptosetback, as reported by the Wall Street Journal on Thursday. The Switzerland-based consortium, formed in 2019 by Facebook to promote a cryptocurrency known as Libra, is selling its technology to Silvergate Capital Corporation of La Jolla, California, a publicly held holding company whose subsidiary, Silvergate Bank, provides services for digital currency and financial technology companies globally. The consortium had originally included some major players in global payments such as Visa and PayPal to dilute the influence of Facebook and to add credibility to the strategic initiative. It had been envisioned that the cryptocurrency venture would be backed by various currencies and government-supported securities and ultimately have 100 corporate participants.
The Libra venture envisioned bringing a global payments platform to empower an estimated 1.7 billion people without bank accounts, most of them poor. Other objectives were to reduce transaction costs, rival the U.S. dollar as a medium of exchange, and bypass the banking industry, not universally known for its popularity. Undoubtedly exciting for youthful populations, particularly earnest, socialist millennials who might tap away money transfers to Nike and Starbucks while being skeptical of capitalism, Libra was yet another example of ego-driven disruption — perhaps even for the sake of disruption. While the objectives of Facebook looked noble and cool at the time, they were an example of corporate arrogance and overreach that may provide case studies for years to come.
As I wrote in The American Spectator in July of 2019 after the launch of Libra was announced, the cryptocurrency was a fantasy initiative that was seen as ill-advised by American and European regulators from the so-called get-go. French and German financial authorities were skeptical and the U.S Treasury warned of use of digital currencies by criminal organizations — for money laundering, support of terrorism, and other crimes. And if the People’s Republic of China with all its resources could not knock the U.S. dollar off its perch, how could technowizards in Menlo Park?
While social media can promote friendships, collaborations, and the exchange of ideas, it also has a dark side — and Meta Platforms does not make the metaphorical top-10 list for corporate good citizenship. It is well-known that Facebook was used by Russian sources to influence the 2016 election — as well as by U.S. parties in 2020. Iran has also been cited as a source of disinformation campaigns. With vast distribution power known as going viral, social media can be used by bad actors to exploit divisions and resentments in our society. Further, internal documents of Instagram, a platform for disseminating photos and videos owned by Meta Platforms, indicate that the company knew that its product could be detrimental to the self-esteem of teenage girls.
Like various technology companies listed on NASDAQ, Meta Platforms stock has not performed well recently, although it has performed almost as well as the NASDAQ index over the past five years. But in general, it would not be wise to bet against the company, still known as Facebook to many.
Facebook’s stated mission “is to give people the power to build community and bring the world closer together.” With an estimated nearly 3 billion monthly users, the company has penetrated over one-third of the world’s population, a staggering accomplishment since it was founded in 2004.
By rebranding itself as Meta Platforms, the company is trying to put behind the bad industry press, allegations, and Congressional hearings. However, the concept of “meta,” difficult to define in an advertising sound bite, is as cosmologically arrogant as the idea of a new money platform that transcends banks, central banks, and legacy structures, disrupting and transforming at the same time. Indeed, the intellectualized allusion to Aristotle’s Metaphysics, an early treatise on the nature of existence, is no coincidence. The concept of “meta” itself (Greek μετά) denotes transcendence of what came before, and in this way signals a metamorphosis — what the company is trying to achieve.
Facebook has a powerful unstated value proposition: it allows the achievement of our dreams, albeit in a virtual context, through the assumption of faux identities and characteristics. An unathletic person can become a locker room tough guy; a shy person can become a dancing queen; a socially isolated individual can develop friendships that would otherwise be impossible; a physically weak person can comport as a sand kicking brute; a loner can look like the center of attention; and a small group can achieve a force multiplier effect.
The metaverse and Libra are similar: both are hard for the non-digital laity to understand, and both say, “We are superior … we are transformational.”
In terms of scale, Facebook’s prospects are bright: it has about two-thirds of the world’s population yet to embrace. If COVID-19 and its variants grind on, the Biden administration continues to sink, inflation keeps destroying value, chaos at the Mexican border continues, Russia invades Ukraine, and the Chinese go for Taiwan, we all may wish to transcend reality — and live in a virtual world.
Frank Schell is a business strategy consultant and former senior vice president of the First National Bank of Chicago. He was a Lecturer at the Harris School of Public Policy, University of Chicago, and is a contributor of opinion pieces to various journals.
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