Facebook calibrates unbanked payments via crypto play

Ian Rogers Payments, mobile & wallets

A high-minded if hard-headed tilt at solving the worldwide hindrance to social justice that is low levels of financial inclusion?

Or a disruptive grab for market share in payments in high income economies via a nuanced intrusion into the effervescent world of crypto and wallets?

Calibra is the name Facebook are giving to “A New Digital Wallet for a New Digital Currency” linked to a sophisticated proposal for a “reserved” cryptocurrency in which Facebook is the chief proponent of “The Libra Foundation”, with Libra the name for yet one more offer in the super-congested world of crypto.

The Libra cryptocurrency will launch in 2020 and this newcomer will be different to a degree, thanks to the comparative novelty of a “reserve fund”.

Idealism frames the beginning of Facebook’s explanation in its announcement late yesterday of a scheme drawing scrutiny and mostly praise in global media.

“For many people around the world, even basic financial services are still out of reach: almost half of the adults in the world don’t have an active bank account and those numbers are worse in developing countries and even worse for women. The cost of that exclusion is high — approximately 70 per cent of small businesses in developing countries lack access to credit and $25 billion is lost by migrants every year through remittance fees,” Facebook said.

“This is the challenge we’re hoping to address with Calibra, a new digital wallet that you’ll be able to use to save, send and spend Libra.

“From the beginning, Calibra will let you send Libra to almost anyone with a smartphone, as easily and instantly as you might send a text message and at low to no cost.”

One cost Facebook and Libra aim to minimise is the loss of capital experienced in a handful of crypto-fads so far.

“Unlike the majority of cryptocurrencies, Libra is fully backed by a reserve of real assets,” the White Paper on Libra published by Facebook and supporters yesterday declared.

“A basket of bank deposits and short-term government securities will be held in the Libra Reserve for every Libra that is created, building trust in its intrinsic value. The Libra Reserve will be administered with the objective of preserving the value of Libra over time.”

Is Facebook's coin the anti-bitcoin, the editors of The Lafferty Daily Briefing asked in a comment on Libra?

“It's a different creature. Bitcoin is decentralised, public, permissionless and uncensorable, and neutral.

“The Facebook coin will have none of those features. It will be private and the nodes to maintain the network will be operated by the big players behind the project.

“The big question is whether Libra will escape its network and be traded on exchanges.”