The Libra announcement was met with a cascade of commentary both positive and negative. Facebook, the largest social network in the world with over 2.4 billion people that has benefitted from acting as a centralised repository of everyone’s data, is now leading the charge to create a new currency in an ecosystem that prides itself on decentralisation and anonymity. While the conflict is apparent, the overall impact on the cryptocurrencies and emerging economies could be significantly positive.
There are two key areas where Libra will benefit cryptocurrencies and society generally; 1) Legitimising the cryptocurrency complex through furthering regulatory certainty and awareness, and 2) Increasing financial inclusion for people in developing markets that lack access to basic financial infrastructure.
Regulatory certainty and awareness
Having a large and legitimate enterprise front a cryptocurrency adds weight to the cryptocurrency ecosystem. The doubters and haters are starting to pay attention and pile through the treasure troves of information on the complex lattice of disciplines, which is cryptocurrencies. Any publicity is good publicity and considering the implications that a pegged global currency could have on the global economy, it’s likely that other people will start to look at different ways the distributed finance movement can be utilised. This could lead to other projects and industries being built on top of or around Libra.
Further, immediately after the announcement, lawmakers in the US started to rally against the proposed digital currency. Representatives exclaimed that they needed to be confident that there are sufficient guardrails in place to deter terrorists, extremists, and/or enemies from utilising the platform. This claim is a bit overblown.
The United Nations Office on Drugs and Crime estimates that over $2 trillion in fiat currencies is laundered every year. The current cryptocurrency market represents 1/6 of the total amount of laundering. This also neglects the traceability of cryptocurrencies but with the increased awareness, hopefully, lawmakers will be educated about the benefits of cryptocurrencies in due course.
Regardless, having an enterprise with the maturity and financial firepower to parlay with lawmakers will force regulations to be firmed up. Grey areas will be clarified allowing companies that would benefit from launching cryptocurrency projects to move forward. This could create new industries and opportunities for people in parallel to the Libra complex.
Financial inclusion
Calibra, the wallet that the Libra Foundation is building to support Libra (the digital currency), could also enable users to store their stocks, bonds, currencies and commodities in a single secure wallet. The wallet could also function as a decentralised and portable digital identity, a prerequisite to financial inclusion and competition.
The implications are significant. Presently, almost half of the adults in the world do not have an active bank account. According to the Libra Foundation, the cost of financial exclusion means that “70 per cent of small businesses in developing countries lack access to credit, and $25bn is lost by migrants every year through remittance fees.” A massive amount of human potential and productivity is being squandered because of the lack of access to financial services.
The Libra foundation will be able to piggyback off the infrastructure of the cornerstone members, including Facebook. This will give populations in developing countries, where micro-loans of as little as $10 can make a difference, access to credit and remittance services for a fraction of what they currently pay — assuming that they can access the services.
Conclusion
Undoubtedly, haters will hate on the vampire squid of social networks when it decides to plant a flag in the cryptocurrency market. However, the benefits for the cryptocurrency ecosystem are easily discernible. Regulations will be written that will allow projects to launch without quirky legal structures or fear of repercussions from regulators. Concerns over the potential for illegal use are uneducated at best.
Further, the benefits from increased financial inclusion in emerging economies could unleash additional human potential and productivity, while reducing the cost of accessing a basic financial infrastructure.
This could be the next step that we need to allow democratised access to goods and services over the internet. There are a number of jobs and opportunities that could be created in emerging economies as cryptocurrencies become mainstream.
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