Facebook has sent shockwaves through the financial world by announcing the launch of its blockchain-based cryptocurrency, Libra, for the first half of 2020. It will be governed by the Libra Association, consisting of representatives of Facebook's dedicated subsidiary, Calibra, and its 27 partner groups. These include Visa, Uber, and the French company Iliad, who will invest 10 million dollars each to have one of the validation nodes in the blockchain. Criticism wasn’t long in coming: some, quite legitimately, raised the issue of data confidentiality. But first let’s focus on the potential good news. Yes, it is potentially good news for consumers, but also for all those looking to break up the monopoly rent of the banking sector.
Good news for consumers
In the short term, Libra could bring about a major revolution, with radically streamlined money transfers. Facebook will apply marginal transfer fees, fractions of a cent. Their objective is clear: to provide a challenge to banks, but also companies like Western Union or TransferWise, for the transfer of funds between individuals all over the world.
The second point will be of particular interest to people living in emerging countries. Libra will be a stable currency, indexed to an extremely solid pool of assets: major currencies (dollar, euro, yen, pound sterling, etc.) but also Treasury bills for the major central banks (Fed, ECB, Bank of England, Bank of Japan). Free from the volatility suffered by cryptocurrencies such as Bitcoin, it can serve as a store of value for all countries in which the economic situation leads to very high inflation (Venezuela, Zimbabwe, etc.).
Good news for iBanFirst and all those looking to disrupt the banks…
For iBanFirst it is good news, having long been considering a move into cryptocurrencies. However, no player had the credibility of the tech giant to launch such a project. Libra could provide a solution to a major problem in international payments: slow transactions. Until now, no cryptocurrency has combined the levels of speed and security Facebook has announced for Libra.
For us, it is therefore an opportunity to be able to use this cryptocurrency in the long term at the heart of our international payment system. If our customers ever wish to use Libra, we will be among the first to implement it. Because once money is moved from point A to point B, it will still need to be exchanged.
However, with Libra, it will be possible once and for all to do without a bank.
It is potentially a major disruption for the entire banking system. By launching what could become a parallel monetary system, global and fully digital, the company will act as a centrifuge: accelerating the ongoing restructuring of an ageing banking system.
Facebook makes no secret of it: their aim is above all to offer access to financial services for 1.7 billion people around the world currently unbanked, primarily in emerging countries.
Banks therefore have cause for concern: a failure to react, or even a failure to engage with Facebook in this adventure could, quite simply, mean the end for them. That includes in their role as store of value specialists for their deposit banking activities.
For all others, and for us, it is potentially excellent news.
Pierre-Antoine Dusoulier
CEO et fondateur d’iBanFirst
Opinion piece published on Linkedin Pulse in June 2019, to be found here