When Central Banking Came to Facebook

This week, monopolistic currency practices came to Facebook:  As of July 1st, Facebook now requires all applications and online games to use Facebook’s virtual currency for all its online functions, such as user upgrades and items within games like the popular FarmVille franchise.  This new rule will also allow Facebook to take a 30% cut from all transactions using the new currency, which is slated to become 1/3 of Facebook’s income over the next year.  

This has drawn criticism of Facebook by the activist group Consumer Watchdog, which filed a complaint to the Federal Trade Commission saying that Facebook is “abusing its power as a popular site” to create a monopoly on virtual currency. In addition, Facebook could effectively control the entire market for virtual goods, which has grown to a $2.1 billion industry.  The irony, of course, is that it’s exactly this sort of fiat that the Federal Reserve uses on a grand scale with legal tender laws.

While the creation of a new currency is welcome, it is troubling that such a huge market may fall victim to the same monopolistic rules that is practiced by the Federal Reserve, which would lead to online developers losing money in the long run, as currency inflation takes hold in this new marketplace. Hopefully a free-market solution will help create a competitive marketplace that benefits developers and Facebook’s bottom line, especially as the virtual market continues to grow. 

Originally published at www.silverunderground.com.

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