Project Libra

By Abhishek Kumar July 25, 2019

Year 2020 may mark as the beginning of a new era of remittance services. Facebook confirmed on
June 18th, 2019 that somewhere in the mid of the next year, they will be rolling out one of the most
awaited cryptocurrencies Libra, backed by blockchain, that will change the landscape of making and
accepting payments. What differentiates it from the other cryptocurrencies like Bitcoin, Ethereum etc.
is its value being tied to the international currencies like Dollar, Euro, Yen etc. providing stability and
establishing confidence among merchants and consumers. It has also come up with the new digital
wallet Calibra which will be used to store, transact and transfer Libra.

Facebook having a user base of 2 billion people foresees a huge potential in generation of revenues
with Libra by serving as a medium of payment across borders, inland remittance services, paid
advertisements services, payment option for e-commerce websites. It has already roped in other
global tech firms like Uber, Spotify which will support Libra as a payment method on their various
channels. Moreover, Facebook projects it as an ambitious project to reach the last mile in the
developing countries where volatility of government – backed currency is high. It claims to bring down
the exorbitant cross border money transfer fee to nominal or even zero. In the physical world, it plans
to offer terminals like ATMs to exchange the coin with local currency. However, the same may also be
used by the tech giant based on the transactions to gather personal information, spending pattern of
the users and speculate their future needs which will help to project more relevant advertisements
and generate revenue.

Facebook has recently been surrounded by several controversies related to stealing of personal data
and compromising privacy of its users. Because of which, there is a widespread unrest, backlash and
trust issues among the Facebook community. To address such concerns, it has been planned to set up
Libra as an individual entity rather than being directly associated with Facebook. Moreover, Facebook
has confirmed that it will restrict itself from combining user data from Libra with its other apps. Also,
Libra will be able to be stored in digital wallets other than Facebook backed Calibra and in those cases,
it will have nothing to do with Facebook. These measured being adopted by the company can help
restore its tarnished image and gain support of both the users and the merchants.

The other major hurdle that Facebook must cross is the getting the nod from the regulators, which is
quite a challenging job considering the reputation of Facebook and cryptocurrencies. To unlock this
hurdle, Facebook has set up a foundation named Libra Foundation and acting as one of the many
companies and non-profit organizations which will regulate and manage the currency. The foundation
comprises of 27 initial members consisting several payment gateways like Visa, MasterCard and
venture capital firms like Union Square Ventures and Andreessen Horowitz. Also, it hopes to onboard
nearly 100 partners by the time it is rolled out in the market for the users. This decentralization of
power will help Facebook to forestall criticisms & avoid regulations. Moreover, nowadays government
also believes that spread of cryptocurrencies is inevitable and association of it with local currency will
give Libra an edge for getting approval from the regulators as compared to the other cryptocurrencies.

Libra may be a gamechanger in transforming the current scenario of FinTech market, provided it is
being used as it has been intended to. Initially, Facebook has to provide incentives like rewards to
onboard a major chunk of users like Amazon, Paytm and Google Pay did. Then, simultaneously, it must
ensure convenience to its users which will largely dictate the market penetration and help compete
with other payment applications and cryptocurrencies. Eventually, everything rests in the hands of
the consumers who will determine its success or failure.