One More Time About Libra: Future Money or Another Unsuccessful Project?
AnalysisBit News Today2 min read
Facebook has unveiled an ambitious project aimed at revolutionizing global currency through blockchain technology. The social media giant announced the launch of its own cryptocurrency, Libra, along with a digital wallet called Calibra. This initiative intends to connect billions of people across the globe, making financial transactions more accessible and affordable.
With Calibra, users will be able to send money to friends, pay for goods and services, and even rent and coffee directly through platforms like Messenger, WhatsApp and a standalone app, expected to launch in 2020. Mark Zuckerberg aims to introduce a global currency that transforms finance for billions, while Facebook revealed that Libra will let people transfer money or make purchases with almost zero fees, operating as quickly, securely, and cheaply as sending a message.
To achieve this, Facebook has assembled a consortium of founding members for the Libra Association, a not-for-profit organization responsible for the development and governance of the token. Members like Uber, PayPal, Visa, and Andreessen Horowitz will each have a say in decision-making processes, with no single entity, including Facebook, able to control the network. The value of Libra is designed to remain stable, backed by a reserve of real-world assets like bank deposits and short-term government securities from major international currencies.
Financial exclusion carries steep costs, as roughly 70 percent of small businesses across developing nations lack access to credit and migrant workers forfeit $25 billion each year to remittance fees. Prof Buckley points to developing nations, where many residents depend on funds sent home by citizens working abroad, as an example of those affected.
However, Facebook's Libra project has encountered skepticism, raising concerns about potential regulatory challenges. Since the Cambridge Analytica scandal in 2018, the social media giant has faced criticism over privacy mishandling of its users' information. Governments worldwide, including the United States and the G7 nations, have expressed apprehension about Facebook creating its own currency and potentially influencing monetary policy. Financial leaders are troubled by a private corporation seemingly attempting to assume a government-like role by creating a currency and potentially swaying monetary policy, while authorities stress the need to protect the financial system's integrity.
Of the 28 founding organizations in the Libra Association, South America's Mercado is the only one located in a developing part of the world. Additionally, over half of the world's 1.7 billion unbanked population resides in just seven countries: Bangladesh, China, India, Indonesia, Mexico, Nigeria, and Pakistan. As a result, adopting a new global currency might not be as straightforward or widespread as Facebook envisions, leading some to predict that Libra could ultimately fail, much like the company's previous ventures into payments.
