Facebook cofounder, Chris Hughes

One of Facebook’s co-founders has warned the social network’s plans for a digital called Libra could allow corporations involved in the scheme to wield power over nation states.

Chris Hughes, whose role in the early days of Facebook has given him a net worth estimated at $430m (£340m), said global regulators should intervene to slow the progress of the cryptocurrency.

Facebook is developing Libra from a base in Switzerland, in partnership with 27 other corporations – including Mastercard, Paypal, Uber and Vodafone – collectively known as the Libra Association.

What is Libra, Facebook’s new cryptocurrency?

“If even modestly successful, Libra would hand over much of the control of monetary policy from central banks to these private companies,” said Hughes, a co-chair of the Economic Security Project, an anti-poverty campaign group. “If global regulators don’t act now, it could very soon be too late.”

Mark Carney, the governor of the Bank of England, gave a cautious welcome to Libra in his speech at the annual Mansion House dinner on Thursday night.

But in an article for the Financial Times, Hughes said the companies involved in the Libra Association, which have each put $10m into the project, would be able to “disrupt and weaken” nation states.

He warned that if enough people in emerging economies traded local currency for Libra, it would threaten the ability of governments to manage their fiscal policies. Emerging markets should place a temporary ban on local banks and payment processors accepting the currency until the implications are thought through, Hughes said.

“What Libra backers are calling ‘decentralisation’ is in truth a shift of power from developing world central banks toward multinational corporations and the US Federal Reserve and the European Central Bank,” he said.

Hughes added that if Libra is successful, Facebook and its partners would hold undue sway over the development of crucial global technology such as identify verification, as well as effectively writing the rules on matters such as privacy and response to theft.

He said anyone believing his fears were overblown should consider how Facebook has had a huge, sometimes negative, effect on other walks of life.

“The company’s decision to offer live broadcasting made it possible for teenagers to stream bullying, terrorists to live cast an execution and a gunman a mass shooting,” Hughes said.

“It has similarly transformed mobile messaging and news and journalism faster than many imagined.

 

Culled from The Guardian (UK)