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LIB
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SENDING MONEY HOME
A stated early target for users of Libra is the migrant worker
who sends money home to support their family. While the
individual amounts may not be large, the scale of the whole
business is huge. The World Bank estimates that $715
billion is moved around the world annually, supporting
over 800 million people, and making major contributions
to the economies of many nations. The established wire
transfer services, such as Western Union, take a cut of this.
The global average for transfer fees is 7 percent, which is
quite a hit: Seven bucks for every hundred of hard-earned
wages disappear when you simply send money home. There
are currently few ways to avoid these fees, and they have
a disproportional effect on wealth. UNESCO (the United
Nations Educational, Scientific, and Cultural Organization)has called for this to be reduced to a maximum of 3 percent to
aid the developing world.
The infrastructure Libra needs is in already place—the
use of smartphones is high, even in countries that lack other
basic services. It’s not unusual for more people to have
smartphones than have access to a bank account. A quick bit
of math also shows why this is such a tempting project for
Libra. If Facebook manages to capture half of the market,
and charges a more reasonable 2.5 percent, that equates to
nearly $9 billion a year. This is one reason why it had been
planned to launch Libra in countries such as India early,
although this has hit a regulatory roadblock for now. Offering
free or low-fee money transfers is also an excellent way to
get Facebook into emerging foreign markets.The Libra Association is
keen to stress it s use for
sending small amounts
of money internationally.year, Facebook attempted
a clear-out, and deleted a
staggering 2.19 billion
accounts. Although many were
profiles and removed at the
point of creation, it is still an
alarming number. Facebook
will have to get much better
at identifying and removing
fake Libra pages and ads. It
has been here before, too—
there were so many scams
involving cryptocurrencies
that it banned all ads for
them in January last year.
It relaxed the rules a little
this spring, allowing related
products and services to bepromoted, but you still can’t
sell cryptocurrencies or
ICOs (initial coin offerings)
on Facebook.CAN IT ALL GO HORRIBLY
WRONG? That is a frightening,
if unnecessarily pessimistic,
prospect. If it did start to
wobble, who would bail it
out? No government is under
any obligation to do so. Some
doom-mongers say Facebook
is at risk of developing a
system that is too big to fail, but
is decentralized to the point
where there is nobody obliged
to catch it if it does. There islittle need to worry unduly,
though—Facebook will have
done its research thoroughly,
and the project is clearly well
funded, and has a powerful
group of backers.
Libra is going to be big.
It is also going to hurt the
core business of many large
international organizations, as
such disruptive technology
has a habit of doing. However,
it is also almost inevitable. If
not Facebook, then somebody
else, and Libra is unlikely to
have the market to itself for
long either. Ready or not, such
currencies are coming. Librashould be ready to launch
next year, although exactly
where and what service it
will initially offer is unclear. In
the meantime, there is going
to be a good deal of sorting
out, as the regulators and
Facebook bargain over exactly
how Libra is to be regulated
and implemented. In a few
years, we will probably
be wondering what all the
fuss was about. The basic
idea is solid, practical, and
genuinely useful: a stable
world currency designed
from the outset to be used in
a digital world.maximumpc.com OCT 2019 MAXIMUMPC 49