Is Facebook's Libra A Service Too Far For Regulators?

Is the public going to trust Facebook with its money? Are governments going to allow the social giant to run its own currency? Are the central banks going to allow Facebook to run what is effectively a parallel currency?

These are all pressing questions as the social giant announced today the launch of Libra -- or as many are calling it already, FaceCoin.

It's good to get a couple of points out of the way right up front. This is not the equivalent of bitcoin. It's not some cryptocurrency that is to be allowed to run wild and go up and down in value with demand. It's due to be backed by real assets and pegged to the value of the dollar. These two crucial steps will give the project respectability and help it gain user trust.

The question remains, for all us Gen X dinosaurs -- what would you need Libra for? The official line is that it is more open, fair and transparent than traditional banking. A Libra balance can be generated through real money being electronically transferred, and from there, the Libra balance can be used to pay for goods and services and sent to friends and family, presumably without transaction fees.

The launch is making a big play of serving people who are underserved by today's banking system -- but that line seems to miss the point that people are going to need a bank account to transfer money from so they can build up a Libra balance.

You can't feed money into a smartphone -- it has to get in the banking system somehow. So, it's difficult to stack up the argument that this is for people who are underserved or who are deprived of banking services. 

Presumably, then, this will be of use for people who want the equivalent of an Esperanto of money. A Libra balance will be converted into any currency and used for contactless payment. One can imagine a business exec or family moving between countries using just their Libra balance to pay for a variety of goods and services without ever having to change their domestic currency into a variety of foreign notes and coins.

It sounds very appealing -- but I would say, as a Brit, that we already have a bunch of fintechs that are doing this for us right here, right now. I'm thinking of banks like Revolut, Monzo and Starling, among others. They allow British customers to have a balance in pounds that can be used to pay for goods and services wherever you are in the world at the touch of a smartphone button. And no, there are no charges and fees. You pay in the local currency and get the standard Mastercard exchange rate with no nasty surprises.

The fintechs are also already working on ways to split bills, which is a possible use of a Libra system if a bunch of Facebook users have all had dinner together. To be fair, it's early days for this feature with the fintechs, and it generally only works if your pals are all on the same app. 

Weighing it all up, I'm not saying that a giant like Facebook can't become a bank. I'm just saying that surely they could buy a fintech and do all this with pounds or dollars, or the domestic currency for each market.

A new, easier way to bank that the UK already has access to is a great idea. An entirely new currency might not be, though.

In particular, one can imagine governments and central banks taking a rather dim view of a tech giant they are investigating over privacy breaches taking on the role of the world's banker. 

Which brings us back to the original question. Anyone else wondering if this is the service that will prompt the authorities to seriously consider breaking up Facebook? Anyone wondering if the authorities will allow this to happen?

Bitcoin will be child's play compared to a rival currency launched by a tech giant with billions of customers. 

If I were one of the London fintechs currently giving high street banks sleepless nights, I think I'd be pretty quick to make these points to Mark Zuckerberg as soon as possible -- and offer a less controversial route to gaining control of users' wallets and not just their media attention.

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