Who remembers Libra, the blockchain based digital currency that Facebook announced exactly a year ago in June 2019? The one which was supposed to be governed by an association with lots of prominent members, like MasterCard, PayPal, Visa, eBay, Spotify, Uber, Lyft, Vodafone Group, Andreessen Horowitz, and of course, Facebook. The one which was supposed to be officially launched in 2020.
If you’ve already forgotten about Libra, then you’ve probably also forgotten about Calibra, which was what the platform and wallet was called. We were told that Calibra wallets would be accessible via Facebook Messenger, WhatsApp, and it would also be released as a standalone app.
The mission statement of Libra was beautiful: “A simple global payment system and financial infrastructure that empowers billions of people [and] providing people everywhere access to safe and affordable financial services. So people everywhere can live better lives”.
The interesting thing with Libra was that the Libra Association was supposed to be an independent non-profit organization headquartered in Geneva, Switzerland, and the currency itself was planned to be backed by a reserve of assets (“Libra Reserve”). In other words, whereas Calibra was going to be a Facebook controlled platform (for using Libra), the currency itself was meant to be controlled by an association (instead of a single company).
I can just imagine how the central bankers of the world must have choked on their morning coffees when they read the news. Having someone else set up camp in their backyard was without a doubt going to cause serious panic and anger. Indeed it didn’t take long before the European Central Bank (ECB) and the Bank of Japan (BOJ) started taking aim at Libra. Under all the heat and regulatory pressure, Libra Association quickly lost a quarter of its original members, including payments firms Visa and Mastercard.
Libra logo as featured on libra.org (public domain image)
During the first half of 2020 there was very little news about what’s going on with Libra. In March Bloomberg reported that “Facebook is rethinking its plans for its own digital currency after resistance from regulators” and in April we read that “the Libra Association now plans to offer stable coins backed by just one nation’s currency in addition to its coins backed by multiple currencies”, and the main reason being that Libra Association had run into regulatory troubles with its plans to offer a coins backed by multiple currencies.
In practice this would mean that the Libra Association could offer coins that would simply serve as the equivalent value of a US dollar or a Euro, for example. Quite a dramatic change to the original idea of having an alternative global monetary system that would make it easy to make digital payments no matter where in the world you are. The new watered down design would essentially make it more like any other standard digital payments service, such as PayPal.
It seems clear that the future of Libra is uncertain, to say the least. That might be one of the reasons why WhatsApp (which Facebook owns) took its time before finally launching payments in its app. On June 15th Facebook announced that users in Brazil would be the first to be able to send and receive money through WhatsApp.
WhatsApp Payments is of course not based on Calibra/Libra, but instead on Facebook Pay, the payments service Facebook launched last year. It’s just a simple way for connecting your Facebook or WhatsApp account to a Visa or Mastercard payment card (either credit or debit).
In Brazil WhatsApp has 120 million Monthly Active Users (MAUs), which means that we’re talking about a sizeable market and probably also good testing ground. India will probably be next (400m MAUs), if Facebook can solve the regulatory hurdles there. Then again, Facebook Pay is already available in the US and the UK, so why not launch in those countries too?
Regardless of what happens with Libra, it looks like interesting developments are in the horizon when it comes to mobile payments – simply because of the huge number of Facebook and WhatsApp users globally.