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The fear for many authorities is that Facebook’s Libra could heavily disrupt the financial system and potentially enable illicit activities like money laundering or terrorist financing.
Some of the most important personas in FinTech and banking spoke on Wednesday at the IMF’s ‘Big Tech and the Future of Finance’ seminar, part of its annual meeting.
Among them was Calibra’s CEO David Marcus, Bank of England governor Mark Carney, Infosys founder Nandan Nilekani, and Havard economic professor Jason Furman. They spoke about digital payments, stablecoins, and of, course, Facebook’s Libra cryptocurrency.
The role of big technological companies as is Facebook itself breaking into the finance world was the focusing point of today’s conversation. As the European Central Bank (ECB) said previously, the release of Libra has driven central banks to redouble their efforts to develop central bank digital currencies (CBDCs).
Calibra’s CEO David Marcus stated that the “status quo for Libra isn’t an option”. However, he added that there might not be only Libra but also other cryptocurrencies. He specified his belief that money creation stays in the hands of the government. “Libra will prevent other ones from creating money because it’s based on a system 1 Libra for 1 dollar. I believe with Libra the world will be better and stronger and Libra would create more trust.”
Being one of the Libra supporters (they are not many in the governmental circles, we should admit), Mark Carney, who is the head of Bank of England, said the high fees that businesses should pay for international transactions are really killing small companies. However, he also emphasized that global coins may represent a threat to other currencies.
He also mentioned that there is a possibility that Libra becomes successful and integral to people’s everyday lives, then it would have to be operational 24/7. He asked:
“How would revenue cover those costs? There’s also the question of how it’s backed. If it’s backed by a basket of currencies, what happens when that basket is rebalanced? Would consumers be affected by instability?”
One of the speakers was also Infosys’ Nandan Nilekani who previously led an initiative in India, where he was a cabinet minister, which saw the government provide 1.2 billion people with a unique digital ID.
“And that is the foundation for e-KYC, so that you can open a bank account in two minutes. This ID system allowed millions of unbanked citizens to open an account in “the world’s largest financial inclusion program”. The first step to launch a stablecoin is a digital ID, according to Nilekani. His project, which issued 1.5 million IDs a day, showed that it’s possible,” said he.
He added that the next step is payment infrastructure, which worked in India for smartphones and featureless phones.
“Even where people do not have devices, they can use their ID, go to a merchant, do a biometric authentication, and withdraw money,” specified Nilekani.
As the policy expert Furman said he was “excited about the promise of bringing cheap financial services to the unbanked, he outlined some possible issues. One is interoperability and enabling competition; another is regulation.”
“We can’t do the break things and fix it later ethos when it comes to the global financial system. So I think you want to have both of these thoughts in your head as you approach the sector,” noted Furman.
While it may seem that the discussions around Libra are not going to stop, let us also remind you that the Association itself is experiencing a number of changes these days. While a number of payment giants (probably being enforced) like Visa, PayPal and MasterCard have taken a decision to leave the Association, Libra claims that it has nearly 1500 candidates to join its rows. And moreover, its management is quite confident that it will get more than 100 members even before the official launch.