It was coming and in an Apple-like way; slowly more and more details were being published, leading to the big announcement last month. However, the launch of the “Libra” project, also called the Facebook “coin,” was very different in many ways from what most experts were expecting. Not only the legal structure but also the list of already confirmed partners and various applications surprised many people. And frightened them.
IMF-director Lagarde already predicted, that ‘big tech’ would have a disruptive effect on the financial sector in the upcoming years. With a player like Facebook, a ‘point of no return’ could be achieved, if a large part of its users will start using its product short-term. In comparison; 350 million people worldwide use the Dollar. If only 14% of the current amount of Facebook users will start using the Libra, this user basis is already larger as the Dollar. The coin is therefore seen as a potential competitor of Paypal, Western Union, and Adyen, but also world currencies such as the Euro and Dollar.
Facebook Coin
Many media, experts and governments stumbled over each other, to mention that this project really went a step too far. Where it is impossible for a highly decentralized project like Bitcoin to call in a responsible person or agency for hearings by legal authorities, it is, fortunately, possible for Libra to do and this has already been done by European and American regulators. In particular, the recent scandals that continue to haunt the initiating company of the currency on a daily basis, are an important reason why many organizations and governments shudder at the idea that it would now also gain access to the financial data of its users. Something that fits perfectly into Facebook’s strategy, just like the Chinese WeChat not to be an open platform, but really a “private messaging” tool, with payment functionalities linked to it.
It was hard for me to find really positive responses to the project by media and governments. Many Western media and governments are looking down on the project in every possible way, but from (mostly developing) countries where the currency is likely to have a major impact, people are already eager to start using it. With our outstanding financial infrastructures in the West, such as the Dutch online banking solutions Ideal (online payments) and Tikkie (peer-to-peer payments), we sometimes forget, that in many countries this is far from the most natural thing in the world.
Remittance Payments
In 2019, one-third of the world’s population does not yet have access to banking services, such as a bank and/or savings account and insurance. In many countries in Asia, Africa, and South America, only 10–25% have this type of facility, simply because they are refused them by banks, as they are not an interesting type of client. A large part of the money being used in these countries ($ 500 billion), is being sent from other countries. Relatives send their families so-called “remittance payments” from the (often Western) country where they work. The costs for this type of transaction are so shockingly high (8–30%), especially for the people who can use each penny very well, that I understand why the reactions from the Western world are completely at odds with those from the rest.
Social Inclusion
With more than $ 6 trillion in cross-border transactions per day, there is also enough room for new models and systems. A currency like Libra can greatly contribute to the “social inclusion” of countries and thus economic growth and the achievement of the “Social Development Goals,” calculated the World Bank and McKinsey. With a digital wallet of their own, people who don’t get/have a bank account can finally save money digitally. You hardly read this argument anywhere else, while it is so incredibly important for the further development of many countries.
Yes, I’m still no enthusiastic about; not only the entire discussion about privacy and data, but also the fact that you don’t get interested in your Libra coins (only the facilitating partners, who according to calculations will earn a lot of money with it) and the absence of a concrete approach to prevent money laundering (AML) and to prevent financing of, for example, terrorism (KYC). It will take a while before the project will be made available; only next year the official launch is expected. On the one hand, I am curious about what is left of the project after the regulatory grill.
Jan Scheele is active in the web3 (blockchain, crypto, NFTs, DeFi) industry since 2013. Besides (former) CEO of a web3 scaleup and founder of an advisory boutique (working for governments, family offices and several multinationals), he is Digital Leader at the World Economic Forum and Board Member at the Blockchain Netherlands Foundation (BCNL). He is writing, consulting, speaking and training regularly about everything web3, all over the world. Furthermore, he is currently finalizing his book about the rise and global impact of blockchain technology.