Facebook announced late last year that they had been quietly working on a homegrown stablecoin that would enable peer-to-peer transfers over WhatsApp and Messenger. The whitepaper is now available at the Libra foundation website, the Facebook-led organization that will be supervising the development and governance of the token. Unlike many other token whitepapers, Libra is distinct in that it has already solved most of the foundational problems of this sort of initiative, and as such I am extremely bullish on its potential.
Libra will enable the Southeast Asian region's first truly successful mobile wallet
Since as far back as 2001, Smart and Globe in the Philippines have both been attempting to gain adoption for their respective mobile wallets. 18 years later, and it's arguable whether more than 10% of the population even knows what Paymaya or Gcash is for.
The problem has always been three-fold: (1) it's hard to get people to install new cash apps if no one else uses them, (2) it's even harder to get them to fill out lengthy customer forms and provide identification, and (3) the promise of "digital convenience" has never been enough of an incentive. Filipinos (and I suspect many other populations in developing countries where the hourly wage is about one dollar) will only want to use a digital wallet if it literally saves them money, and are less enthusiastic if all it does is save them time.
The Facebook strategy handily solves the first two problems, in that not only does Facebook have 2 billion users across the globe, but it is already installed on most of those people's smartphones. A wallet called Calibra is being developed (and will presumably be sideloaded into the WhatsApp or FB Messenger apps) and will allow users to send cash as easily as sending a message.
You also wouldn't need to fill out a lengthy form. Instead you would simply check off the box that would say "Allow Calibra to collect the years worth of personal FB data it already has on me, and show these to the authorities when appropriate."
But will it help you save money?
Libra is a stablecoin, and it will most likely be pegged to the USD. When you consider the Philippine Pesos' abysmal historical performance against the dollar, then Libra will definitely help you save money.
Most millenials forget that in the 90's, the USDPHP exchange rate was 25 pesos to a dollar. That means that, in less time than it took to make you woke, the peso has lost 50% of its value.
At the risk of sounding anarchic, getting out of the Philippine Peso (and this is the same advice I give for all secondary currencies) is the single most financially-sound decision anyone can make in the long term. So when your parents admonish you to save more money, don't bother. Saving your third-world currency is a fruitless endeavour and will yield less value than you started off with the longer you save it. If you don't have the guts or the know-how to put your money into Bitcoin, at least put it into USD or Euro.
My optimism around Libra actually stems from the fact that it is a "backdoor" way for people who don't understand financial markets to inadvertently protect themselves from currency collapse. Sure it's just pegged to the USD, but that's still an order of magnitude superior to any third-world currency.
(Of course, the superior long-term strategy is still to keep your money in Bitcoin.)
Will Governments Allow This Though?
The governmental backlash against Libra has already begun, with France and Germany sharing their misgivings about Facebook becoming a shadow bank. This is a war that Facebook was born to fight, and its scale will dwarf all of their previous legal battles. They have proven that they are not only massively-financed, but also extremely clever in their long-term planning.
Remember that, in 2013, Facebook launched Internet.org, a non-profit initiative that has thus far brought free internet access to 40M people across the developing world. A big part of Facebook's continued success has to do with the fact that they are willing to pay for your internet access in exchange for your identity and behavioural data. Their utter dominance in countries like the Philippines, Indonesia, and all over the African continent can be partially attributed to Internet.org, because even when users in these regions don't have any airtime credit, they can still get on Facebook.
This same strategy of superficial magnanimity is being employed with Libra.org. Here, Facebook will subsidize all the transactions performed on the system.
Imagine being able to receive money from your migrant relatives in Canada, Italy, or Japan instantly, with no fees, and with neither of you having to install any new apps. Sounds pretty good right? These end-user benefits will have less to do with Libra's blockchain technology than it will with the miracle of venture capital.
And it will spell doom for every other remittance business in the space.
Does Libra Make Cryptocurrency Irrelevant?
Given the venue in which you're reading this article, you may be concerned that Libra's potential to disrupt remittance and payments markets will obsolesce cryptocurrencies in general. I think that Libra, even its nascent whitepaper stage, represents a superior form of several major cryptocurrencies: XRP, XLM, Tether, and all other stablecoins. Why? Because it solved consumer adoption before it launched, and has far deeper pockets with which to stabilize its own value.
Ripple's bargain-bin acquisition of Moneygram earlier in the week is a testament to how seriously they are taking the announcement. Moneygram represents the one thing that Facebook doesn't currently have, a physical last-mile delivery system. It's a savvy, albeit defeatist, kind of move. Ripple knows that the only way they can stay relevant is if they control the edges of the transfer network, since Libra will render XRP unnecessary at the center.
Computational cryptos like ETH, EOS, ADA, IOTA are busy fighting their own battles, and will largely be unaffected by Libra. (The whitepaper does mention that it's possible to write smart contracts within Libra using Move, but this is technologically closer to Bitcoin's Script than to Ethereum's turing-complete Solidity.)
What about transactional cryptos like BTC, LTC, DASH, ADA, XMR? Well, that's a simpler answer.
The Libra proposition is, essentially, peak fiat.
Libra's existence proves that we need decentralized, censorship-resistant cryptocurrencies, because the status quo is soon going to become not just your average government-controlled fiat, but one that is controlled by a massive global corporation. It's an attempt to unify fiat markets at a planetary scale under a single brand name. This is about as centralized as humanity is ever going to get.
And I don't know about you, but I'd rather be in Bitcoin.
by Luis Buenaventura
