Virtual Facebook currency faces realworld resistance

LONDON, If Facebook's new cryptocurrency should

resonate anywhere it should be India, where the social media giant has more

than 300 million followers.

Many Indians are shut out of banking and face punitive fees for simple

transactions, like transferring money to their loved ones.

But in India as elsewhere, the US company's ambitions to remake global

finance through its Libra currency will have to overcome regulatory

mistrust, plus the existence of popular homegrown rivals in the market for

digital payments.

If regulations were not a hurdle in India, Libra would instantaneously

have a massive reach because of Facebook, Anirudh Rastogi, the founder of a

technologyfocused law firm in New Delhi, told AFP.

When it launches next year, Libra will be backed by a basket of realworld

currencies and a consortium of companies. To mint and store new coins, access

to its underlying blockchain technology will be more restrictive than for

the freeforall of bitcoin.

Companies rooted in traditional finance such as Visa and MasterCard have

joined from the start, betting that Facebook's clout gives the project enough

potential to overcome any downside to their existing business models.

I will definitely use Libra as the idea seems good and they have a big

partnership list thereby offering credibility, 23yearold consultant Prasad

Khake said in Mumbai.

The platform will work depending on how accessible and easy it is for

billions of Indian users, he said.

Therein lies the problem. Cryptocurrencies are currently banned in India,

and the country's central bank, which calls them a contagion, is taking its

time to craft a regulatory framework.

Bulging wallets

Facebook itself is banned outright in China, and the company admitted it

would be unable to operate Libra anywhere that is subject to US sanctions,

such as Iran.

There is suspicion too on its home turf, with US lawmakers highlighting

Facebook's poor record in safeguarding user data. The Senate banking

committee has scheduled a hearing for July 16.

French Finance Minister Bruno Le Maire said digital money could never

replace sovereign currencies. Bank of England governor Mark Carney said Libra

would have to withstand the toughest scrutiny and not become a tool for money

laundering or terrorist financing.

There is clearly potential if Facebook makes good on its pledge to bring

lowcost or free banking to the unbanked and open up areas such as money

transfers, where the company � citing UN data � says migrants lose $25

billion every year in remittance fees.

For their part, money transfer businesses say they welcome the challenge.

It may help with educating regulators, could evolve the payments ecosystem

faster and eventually lower the cost of moving money, making the

conversations on the issues we're tackling more mainstream, TransferWise

chief technology officer Harsh Sinha told AFP in London.

To access Libra on their smartphones, users will go through a virtual

wallet called Calibra. There are plenty of such ewallets already, however.

Paytm and FreeCharge are popular in India. Facebook's own WhatsApp has been

trialling a digital payments service in India, but has faced resistance from

the central bank.

Here to stay

The Philippines could be another fertile market, with Filipinos working

overseas sending tens of billions of dollars every year through money

transfer outlets. But often in the Middle East and the rest of Asia they are

kept on a tight rein by employers and lack access to the internet.

They (overseas workers) barely embraced online banking so cryptocurrency

may even be a stretch unless the demographics goes to an upswing with tech

savvy millennials, said Victoriano Gimenez, an electrical engineer who

worked for six years in Saudi Arabia.

Another popular platform in India is MPesa, which started life in east

Africa and has helped millions in Kenya, Zimbabwe and elsewhere move beyond

cash and traditional banking.

Winning over the foreign public to the idea of Westernbacked crypto

payments is one thing. Winning over their governments is another, and could

be the biggest challenge to global adoption of Libra.

Regulators around the world have really now to wake up and actually say

'well, what do we do about regulating this?' and not just banning this,

because it won't be going away, Iqbal Gandham, managing director of eToro in

Britain and chairman of the industry group CryptoUK, told AFP.

But even if regulators don't see a threat to their sovereign currencies,

they will still be exercised by exchange rate risk, liquidity in times of

financial crisis, and the impact on corporate competition, according to ING

economists Teunis Brosens and Carlo Cocuzzo.

While a lot remains unclear at this stage, Facebook has clearly started a

new chapter on digital currencies, they wrote in a research note. Over to

policymakers for a response.

Source: Bangladesh Sangbad Sangstha (BSS)