Facebook users are being warned not to rush into the social media behemoth’s new digital currency, citing fears the network could expose them to theft and security breaches.
Speaking to The New Daily, Canstar financial services chief executive Steve Mickenbecker urged users not to become early adopters of Facebook’s ‘Libra’ coin – slated for release in 2020 – as its current design is “opening the back door for hackers” already.
That fear stems from Facebook’s decision to make the technology underpinning the newly announced Libra network ‘open source’, meaning any developer will be able to access its coding and build their own applications for the network.
“In an exchange, you’re reliant upon keeping your system safe, and blockchain will do that. But if you open your platform to all sorts of developers – and there looks to be a fairly low hurdle there – then you have to worry that you’re more open to being compromised.”
Julian Plummer, managing director of cyber security firm Kamino, described Libra’s open-source access as “exciting times for anyone with a malicious bent”, and warned consumers to watch for new versions of old scams.
“We are going to have a whole new, exciting way of scamming consumers out of money, that’s for sure,” Mr Plummer said.
“Libra will require electronic wallets to be stored, and it appears that given the open-source nature of Libra anyone will be able to build a wallet app, so the obvious weakness will be around the proliferation of these wallets and how they verify the users of those wallets.”
Data use still a concern
Facebook’s protection of user information has remained a major concern since revelations that digital information firm, Cambridge Analytica, had used that data to tip the scales in the 2016 US presidential election in which Donald Trump won the presidency.
Mr Plummer noted the business has “gone to great lengths to play down fears associated with centralising a currency by a company with a poor track record of privacy” by establishing Libra through the eponymous Libra Association, sharing control of the centralised currency with 27 other founding businesses.
But he cautioned that making underlying software open source was precisely how Cambridge Analytica was able to “help themselves to 87 million people’s personal data”.
“You can let your imagination do the rest, but I am sure the friendly folks at Facebook have got all this covered. So I would be asking questions about how developers are vetted, and the security protocols around those developers,” he said.
“Libra will certainly be a rich ‘honeypot’ for hackers to attack, and prestige for any hacking group able to pull it off will be immense.”
Aleks Svetski, founder of cryptocurrency investment app Amber.io, added that Facebook will also inevitably make use of transaction data collected through its Calibra wallet.
“For a company that makes money out of data, they’re not going to turn around tomorrow and say ‘We’re going to turn a blind eye to everything you’re doing’ – it would be naive to even think that,” he said.
“If you’re privacy conscious, don’t go near it.”
Normal protections not designed for Facebook
Those problems are compounded by Facebook’s status as a technology company rather than a financial services business.
Peter Marshall, data manager for financial services comparison site Mozo, warned that some laws and regulations designed to protect banking and finance customers won’t be applied to Libra – potentially putting customers at risk.
An example of this is that money stored in a digital wallet as Libra won’t be covered by the Australian government’s deposits guarantee, which protects deposits of up to $250,000 if something happens to the authorised institution holding that money.
“I would urge anyone thinking of putting more than a little spending money into Libra to consider that fact. If anything were to happen to the global economy, an untested currency like Libra would probably not be a great place to have too much money.”
A key selling point for many cryptocurrencies, such as Bitcoin, is the anonymity with which transactions can be made.
Facebook noted in its Libra announcement that its new coin will offer similar privacy to users, but its in-house digital wallet, Calibra, remains a Facebook subsidiary.