With the release of its white paper, Facebook announced that the Libra ecosystem is set to be launched in the first half of 2020. Its stated aim is to “enable a simple global currency and financial infrastructure that empowers billions of people.”
The Libra currency is a stablecoin backed by a reserve of real assets. It runs on the Libra Blockchain which is operated by a network of validator nodes overseen by the Libra Association. The Association's membership list is a virtual who's who (Visa, Paypal, Vodafone, Uber, Spotify, Anchorage, etc.) in payments, fintech, telecoms, and venture capital.
Its corresponding digital wallet for Messenger, Whatsapp and a standalone app by the subsidiary, Calibra, will be designed for people to send, receive and spend their money as easily as firing off text messages or photos "at low to no cost."
David Marcus, former president of PayPal Holdings Inc, who is leading Facebook’s Libra efforts, has said that the company does not plan to take a fee when people send money to friends, but will likely charge “tiny transaction fees” for payments to businesses.
If all goes as planned, Facebook will become a new payment and commerce hub that will take small but profitable cuts from billions of transactions, replicating the success of China's WeChat and QQ. The payment services facilitated between users and merchants on those platforms have turned owner Tencent Holdings into the most valuable publicly-traded company in mainland China.
“There’s clearly a demand out there to be able to start and finish the transaction within the app,” said Paulette Rowe, Facebook’s global head of payment and financial services partnerships.
So, what stands in the way of Facebook becoming that mega transactional platform it is aspiring to be?
The company’s announcement came under immediate fire from U.S. lawmakers and regulators across the globe as transacting in the new coin will require engagement with central banks, financial regulators, cross-border services, and enforcement authorities worldwide.
Randal Quarles, chair of the Financial Stability Board, which coordinates financial rules for G20 countries, warned that wider use of crypto-assets for retail payments needed closer global scrutiny by regulators.
Maxine Waters, chairwoman of the U.S. House Committee on Financial Services, has quickly scheduled hearings to investigate Libra and told Facebook to stop the development of the project until then. The House hearing is set for July 17, 2019. The Senate is expected to hold a hearing on the same issue the day before.
European regulators are also demanding for more details on the fledgling project.
Gaining consumer trust after years of privacy mishaps may be more challenging than Facebook expects. Anti-Facebook communities have formed which are concerned that Facebook has become too massive, influential, and careless with users' privacy.
The cryptocurrency community might not be all-welcoming either. Eric Alexandre, CEO of Jetcoin, digital fuel for the sport and entertainment space, commented on Facebook’s ban on cryptocurrency ads on its platform back in January 2018.
“After banning crypto ads for more than a year, Zuckerberg does a complete 180-degree and has not only reversed his ban but is now launching his own crypto coin. I think it’s clear to say all of this is obviously financially-motivated.”
This reinforces the sentiment shared by those in the cryptocurrency community who believe the permissioned blockchain protocols of Libra, which are centrally controlled by the Libra Association, hardly give control back to the community and are inherently flawed.
The early access code for Libra hit GitHub two weeks ago, and both critics and trollers have taken aim at the project since.
Looks like mass adoption might still be a challenge despite the more than 2 billion users amassed by Facebook and its affiliates.
This ties in with the 'trust' issue but is worth mentioning on its own. Hedera Hashgraph took a full-page advertisement in the Wall Street Journal to “thank” Facebook for imitating its DLT (Distributed Ledger Technology) model.
Chief executive officer and co-founder Mance Harmon stated in his blog post that he “sat down with David Marcus of Facebook in February 2018, and shared [their] vision for Hedera, including the technology roadmap, the importance of a governing council, and more. Much of what [they] shared was echoed in Facebook’s Libra announcement [that] week”.
Interestingly, Harmon also emphasized that in terms of security, the Asynchronous Byzantine Fault Tolerance is “the gold standard for security in decentralized computing, and gives the highest level of protection from DDoS, network manipulation, and other attacks.”
To date, Hashgraph is the only significant ledger mathematically proven to be ABFT as opposed to Libra’s BFT (Byzantine Fault Tolerance).
Global Identity Gaps and the Unbanked
Mark Roden, chief executive officer of Ding, an international instant mobile top-up platform, pointed out that Libra being touted as the ultimate solution for unbanked and migrant workers sending money home to their families was not an accurate depiction.
"We welcome all developments towards greater financial inclusion, but the answer is not as simple as Facebook suggests. Facebook has confused the challenges of global remittances with those of access to financial services among low-income communities.
“According to the World Bank, there is a global identity gap of over one billion people - likely also unbanked as a result. Without formal government identification, it is highly unlikely that these people will be able to access Libra platform services.”
Hence, Libra may well be a useful tool for people who already have access to financial services, but for the many who "don't have state identification documentation or a smartphone, and for those in countries with capital controls and weak communications infrastructure," Roden contended that, "it's not going to make any real difference."
Waiting on the Next Wave
Still, it is an undeniable fact that Libra has brought the crypto mass adoption conversation into the mainstream.
It is a conversation that is ongoing, which is what we should expect from any long term adoption and proliferation of new disruptive technologies.
In the end, success will be claimed by projects that can grasp the delicate balance between commercial and market sensibilities; projects that can offer value propositions and not just technical overwrought.