It is already one of the most controversial and troubled plays that is yet to see the light of day.
Facebook’s Libra payments project hit the headlines again this week after it was reported that the European Commission (EC) is set to scrutinise Mark Zuckerberg’s dive into the murky world of cryptocurrency, following concerns about the move across the globe.
According to Bloomberg, the EC is planning to investigate potential anti-competitive behaviour related to Libra, due to fears that the service could unfairly shut out rivals.
News of the EC’s probe follows comments from President Donald Trump, who took to Twitter (what else) last month to also shoot down Facebook’s plans and throw shade on cryptocurrencies as a whole, stating he was “not a fan”.
“Facebook Libra’s virtual currency will have little standing or dependability,” he tweeted. “If Facebook and other companies want to become a bank, they must seek a new banking Charter and become subject to all banking regulations, just like other banks, both national and international,” said the ever-outspoken ‘leader of the free world’.
What is Libra?
Breaking down Libra, Facebook described its play as a global currency and financial infrastructure, powered by blockchain technology, with a major push towards those in the world that lack access to basic financial services.
Working as a digital wallet called Calibra, the service will be available in the company’s Messenger, WhatsApp and standalone app, with an expected launch in 2020 (although in light of recent developments, that now feels ambitious).
Initially, it will work as a P2P transfer tool, but the company aims to extend functionality to paying bills and making purchases at retailers, as well as small business use cases.
Notably, Facebook is already dabbling with payments in Asia, experimenting with services through WhatsApp and it also offers payments through its Messenger service in the US.
This project is however notably different, because Calibra will rely on the transfer of cryptocurrency Libra rather than traditional currency.
Libra, devised by Facebook, will be run by the The Libra Association, members of which include telecoms giants Vodafone and Iliad, as well as Uber, eBay, MasterCard and Visa.
So, why the uproar? As per the EC’s investigation, who is Facebook threatening to shut out? And, do Trump’s ramblings have any merit, meaning Facebook’s plan will be ultimately foiled?
Mukul Krishna, global head of practice, digital media at Frost and Sullivan, doesn’t think so.
Speaking to Mobile World Live, Krishna believes the scrutiny over Libra is largely expected, considering “the history of scandals Facebook has had to face over the years regarding consumer data”, but ultimately it will eventually launch.
Crucially, though, Facebook will have to make sure there are no repeats of its recent missteps with its ambitious payments plan.
“The cryptocurrency market is volatile and to make sure Facebook increases its probability of success, it needs to be thorough about data security, encryption and financial backing among a myriad of other issues.”
Considering what Facebook is actually trying to do, which could see a shake-up of the financial sector as a whole if successful, Krishna noted “it would be surprising if it were less challenging” to launch, particularly because of the company’s access to a massive amount of consumer data.
While Libra, as a cryptocurrency, will compete with the likes of Bitcoin, Ethereum et al, perhaps more pertinent for the mobile industry will be the competition the payments platform will create for already established mobile money players, such as Safaricom, MTN and Airtel, to name a few.
“It will be disruptive for incumbents,” believes Krishna. “Once Libra is introduced to the existing ecosystem it may simplify currency exchange across international markets.”
Ruomeng Wang, research and analysis manager – fintech and blockchain intelligence services at IHS Markit, concurred, tipping Facebook’s already established reach to ensure that Libra increases adoption across the mobile payments sector.
“Facebook has launched P2P payments in some markets, the integration of Libra wallets into WhatsApp and Messenger services will further increase the acceptability of digital currency and mobile money,” she said.
The blockchain debate
Facebook’s dive into cryptocurrency and mobile payments again brings blockchain to the forefront, with the technology tipped to play a major role for operators in the future.
However, at this year’s MWC Barcelona on a panel I hosted, US operator Sprint’s SVP of IoT Ivo Rook suggested the very obvious link between blockchain and cryptocurrency could impact the former negatively.
“Because of the encryption, these two are strongly intercorrelated. Ironically, cryptocurrency doesn’t have a positive correlation to it. Cryptocurrency is associated with risk, while blockchain is there to take the risk out. So I think there is a lot of education to be done,” said Rook back in February.
Frost and Sullivan’s Krishna believes blockchain has “moved much further along”, and while there will always be nefarious use cases for the technology, the potential benefits it provides far outweighs the downside.
The tussle between regulators and the market will however not go away anytime soon. “Regulators will try and flex their muscles to remove some of the anonymity and make crypto transactions more transparent,” he said.
Libra in limbo
For now, Facebook remains in something of a limbo. Regulators are indeed flexing their muscles to make the company answer some tough questions about its financial play, with concerns about the company and the tech sector as a whole only heightening due to recent breaches of consumer data.
“Comparing with other cryptocurrencies, the launch of Libra is more complicated,” IHS Markit’s Wang summed up, noting the company’s standing as a dominant social media player with more than two billion monthly active users.
And for those opposed to the play, that figure alone removes any merit from Trump’s assertion that Libra will have “little standing”.
The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.