Libra and Calibre could change the world of payment, credit and monetary systems if regulators let it happen. For credit information it would be the end of many business models, particularly when people may make transactions from wallet to wallet.
Your editor-in-chief attended the B20 meeting in Berlin in May of 2017 (Part of Germany’s presidency of the G20 meeting in Hamburg) where a panel of German ministers, bankers and business leaders had a debate on the impact of alternative finance on banking. The former CEO of the Deutsche Bank John Cryan (see picture) stated that the banks were not worried about FinTechs, they were more worried about Silicon Valley’s tech companies.
Two years later Libra is not only scaring the banks, financial systems but also the general public. Financial systems are based on trust, sometimes it works. It says so on the US currency notes: “In God We Trust”, never mind about the gold in Fort Knox which was supposed to back the currency.
Your Editor-in-Chief always salutes new game changing experiments provided they are in the hands of trustworthy people. Facebook however was reckless in managing a 2,7bn user community, which has damaged its reputation and trust. Not a good starting point for a business model which is based on trust, to say the least.
“Mark Zuckerberg’s admiration for the emperor Augustus and all things ancient Roman is reflected in Facebook’s proposed blockchain and digital currency Libra. Naming the project after the Roman unit of weight (from which the abbreviation lb comes), makes perfect sense.
Facebook’s insistence that Libra is not its own project is less convincing. At a Senate banking committee hearing about Libra on Tuesday, Facebook executive David Marcus stressed that the company would be one of 100 members of the Libra Association managing the currency. Facebook’s role will be via Calibra (a dodgy wordplay on Libra and calibre perhaps?). This will develop a digital wallet and other products to use Libra. To gain Libra users, Facebook will have to earn their trust, Mr Marcus said. It will compete with other wallets. Although of course other wallets will not access a network of 2.7bn users.
For all its protests, Facebook is still regarded as architect of Libra, meaning that Mr Marcus came in for some uncomfortable questions. Perhaps that is a given when talking to Congress about plans to create a currency free from government control. Yet the focus was often less about cryptocurrencies than Facebook’s failings as a company.”
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This commentary was written by BIIA Editor-in-Chief and does not necessarily reflect the opinions of its members.