Libra by Facebook; Implications to the concept of 'Legal Tender' and Data Privacy

Summary:

Facebook recently announced the arrival of its cryptocurrency – Libra, which will be backed by blockchain technology.

Facebook says they want the cryptocurrency to become Legal Tender and easily usable on all it’s social media platforms.

This article examines the legal implications to the use of this cryptocurrency in relation to what is considered Legal Tender in Nigeria and the protection of the data of Facebook users in Nigeria.


INTRODUCTION

With the recent clamor for various cryptocurrencies it was really no surprise when Facebook announced on 18th June 2019 via a white paper, the news of the arrival of its new digital currency known as Libra.

Similar to Bitcoin, Facebook announced that Libra will be backed by blockchain technology, however unlike other cryptocurrencies Facebook stated its desire to have its digital currency backed by financial assets such as a pool of currencies and the US Treasury Securities.[1]

Facebook in its white paper described the Libra blockchain as a decentralized, programmable database designed to support low-volatility cryptocurrency that will have the ability to serve as an efficient medium of exchange for billions of people around the world[2], effectively desiring for the cryptocurrency to become Legal Tender.

The white paper suggests that Facebook users could access Libra through the use of Facebook social media pages and its other social media related social communication networks i.e. Instagram, and WhatsApp thus giving Facebook and these related networks the ability to analyze every purchase by every Libra user

LIBRA AS LEGAL TENDER

The concept of Legal Tender generally describes any official medium of payment required to be accepted by law as medium of commercial exchange and payment of money debt. Legally for any form of currency to become Legal Tender it has to have the backing of the Law i.e. Legislation. As such what qualifies as Legal Tender in any jurisdiction is mainly determined by the laws of the jurisdiction where such form of payment/currency is being offered.

Going by the above and seeing as the ultimate aim for Facebook is for Libra to serve as an efficient medium of exchange for billions of people around the world it goes without saying that it would be expected that at some point Libra would become acceptable around the world and therefore backed by Law in the different jurisdictions where is it accepted.

Under Nigerian law, whilst there is no “legal definition” for the term Legal Tender, Section 15 of the Central Bank of Nigeria Act[3] provides that the unit of currency in Nigeria shall be the Naira. Section 20 (1) of the same Act provides that the currency notes issued by the Central Bank of Nigeria (CBN) shall be legal tender in Nigeria at their face value for the payment of any amount whilst Section 20 (5) further provides that a person who refuses to accept the Naira as a means of payment is guilty of an offence and liable on conviction to a fine or 6 months imprisonment.[4]

The Act ultimately bestows upon the CBN the responsibility for issuing the Legal Tender currency in Nigeria and regulating its usage, and in line with its powers and responsibilities the CBN vide a circular dated 12th January 2017[5] declared that digital currencies are not Legal Tender and further stated that Banks and Other Financial Institutions are not allowed to use, hold, trade and or transact in anyway in virtual currencies.

LIBRA AND THE CONCEPT OF DATA PRIVACY

Section 37 of the Nigerian Constitution (1999) provides and guarantees the privacy of citizens, their homes, correspondence, telephone conversations and telegraphic communications”[6]. The Constitution being the Grund Norm[7] therefore provides the general ultimate guarantee for the protection of citizen’s data and as such protects one’s data privacy.

Facebook being a global social media platform has recently been in the spotlight for its inability to protect a massive amount of its user’s data which it collects. In 2016 a whistle blower notified the public that Cambridge Analytica (an advertiser company on Facebook) had breached data privacy undertakings and harvested millions of Facebook users’ data for political purposes.[8] To combat the trend of hacking and data privacy breaches various jurisdictions have adopted stern legislations which provide mandatory procedures for the gathering and usage of citizens data.[9]

On 25th January 2019, the Nigerian Information Technology Development Agency (NITDA) published the Nigeria Data Protection Regulation (NDPR 2019)[10], which regulation amongst other things seeks to foster safe conduct of transactions involving the exchange of personal data and to prevent manipulation of personal data[11] of Nigerians within the Nigerian jurisdiction. Before then, Nigeria’s Data Protection framework existed in several bodies of Legislations and guidelines

The NDPR 2019, requires the procurement of consent from the data subject[12] before the use of the data subject’s data[13]. It also prescribes fairly steep monetary penalties ranging from N2M – N10M.[14] It is safe to say that the NDPR 2019 is definitely a step in the right direction.

Generally, it can be said that a large amount of concern with regards to data privacy towards the launching and usage of Facebook’s Libra exist because;

  1. Of an estimated 7.7 Billion people in the world[15], Facebook as of 1st quarter 2019 had recorded 2.38 Billion active users[16] thus the probability of Libra’s acceptance and usage worldwide when it is finally launched is high;
  2. Facebook had in the past failed to secure and or protect some of the large volumes of personal data entrusted in its care by its users and thus the probability and possibilities of data theft and privacy breaches when Libra is launched for its users is further heightened.

CONCLUSION

Despite the CBN’s circular to Banks and Other Financial Institutions barring trading in cryptocurrencies, according to Ray Youssef, CEO of cryptocurrency exchange Paxful, 41% of new users in Bitcoins and other related cryptos in 2018, hailed from Nigeria, Ghana, and South Africa.[17] It is therefore clear that the traditional forms of receiving payments through physical currency and via brick and mortar Banks is likely to fade away soon. Considering the Exponential rate at which technological change currently occurs[18] the anticipated change in our current global payment echo system may even be faster than we think.

It is therefore imperative for our Laws to catch up with modern technological trends whilst ensuring the safety of our data and guaranteeing the Rights of citizens to their privacy. It is clearly no longer enough for the CBN to ban the use of these various forms of digital currencies but to put in place a solid legal framework to guide the use and acceptance of these forms of payment as Legal Tender.

In relation to Libra, given the number of worldwide Facebook users and users of its related communication networks and tools, the likely worldwide acceptance of the Libra payment system/currency (especially if it delivers on all that has promised) could be very swift and quite rapid.

However, for Libra to gain acceptance as anticipated, more has to be done to clear a number of grey areas around the technology and a lot more work still has to be done  with regards to safe guarding users’ personal information and guaranteeing financial security for its users, all in all Technology and the Law have to consistently and symbiotically innovate.


[1] https://www.wsj.com/articles/facebook-unveils-crypto-wallet-based-on-currency-libra-11560850141

[2] https://www.forbes.com/sites/rachelwolfson/2019/06/19/facebooks-cryptocurrency-libra-validates-blockchain-but-industry-experts-voice-concerns/

[3] CBN Act 2007, (as amended)

[4] See Also CBN Circular dated 17th April 2015 titled “Currency Substitution and Dollarisation of the Nigerian Economy” –https://www.cbn.gov.ng/out/2015/bsd/circular%20on%20currency%20substitution%20final%20.pdf

[5]https://www.cbn.gov.ng/Out/2017/FPRD/AML%20January%202017%20Circular%20to%20FIs%20on%20Virtual%20Currency.pdf

[6] Constitution of the Federal Republic of Nigeria (Promulgation) Act (as amended), Chapter C23, Laws of the Federation of Nigeria 2004

[7] https://www.definition.net/define/grundnorm

[8] https://www.theguardian.com/news/series/cambridge-analytica-files See Also https://thenextweb.com/contributors/2017/08/23/hackers-using-social-media-hack/

[9] E.g. GDPR Guidelines in the European Union (EU) https://ec.europa.eu/commission/priorities/justice-and-fundamental-rights/data-protection/2018-reform-eu-data-protection-rules_en

[10] NDPR 2019 – https://nitda.gov.ng/wp-content/uploads/2019/01/Nigeria%20Data%20Protection%20Regulation.pdf

[11] Chapter 1, NDPR 2019

[12]  According to the Definition Section of the NDPR 2019 “Data Subject” means an identifiable person; one who can be identified directly or indirectly, in particular by reference to an identification number or to one or more factors specific to his physical, physiological, mental, economic, cultural or social identity;

[13] Chapter 2, NDPR 2019

[14] Chapter 2.10, NDPR 2019

[15]  https://www.worldometers.info/world-population/

[16]  https://www.statista.com/statistics/264810/number-of-monthly-active-facebook-users-worldwide/

[17] https://punchng.com/bitcoin-in-nigeria-how-to-buy-the-worlds-top-cryptocurrency/

[18] Moore’s Law suggests that the doubling of computer processing speed’s currently occurs every 18 months; See https://bigthink.com/think-tank/big-idea-technology-grows-exponentially , See Also https://medium.com/predict/moores-law-is-alive-and-well-adc010ea7a63


Disclaimer

The views expressed here are those of the individual Flutterwave personnel quoted and are not the views of Flutterwave or its affiliates. Certain information contained here has been obtained from third-party sources, including from portfolio companies of funds managed by Flutterwave. While taken from sources believed to be reliable, Flutterwave has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation.

This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only, and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any fund managed by Flutterwave. (An offering to invest in
Flutterwave will be made only by the private placement memorandum, subscription agreement, and other relevant documentation of any such fund and should be read in their entirety.) Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by Flutterwave, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results. 

Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. 

]]>

More amazing articles for you