Has Facebook’s plan for a new crypto-currency proved that the bitcoin believers were right all along? That’s just one of the big questions we seek to answer in this month’s Tech Tent podcast, which is a special edition all about the Libra coalition and its implications for the wider crypto-currency scene.
For the past 12 months, a small team at Facebook’s headquarters in California has been planning something big. On Tuesday, they went public. The world was told that Libra, a new global currency for the internet, would make paying for things or transferring money across borders as simple and cheap as sending a text message.
The announcement was accompanied by an avalanche of white papers, presentations and Q&As from Facebook and its Libra coalition partners. But many questions were left unanswered.
Is Libra really a crypto-currency? How would the coalition build a fast and efficient blockchain infrastructure when the technology has so far proved cumbersome, power-hungry and hard to scale? And – crucially – who will make this currency safe and ensure it does not follow bitcoin in becoming a haven for crooks and terrorists?
We got an answer to this last question, in a BBC interview with the governor of the Bank of England. Mark Carney made it clear that Central Banks were determined not just to sit back and watch Libra happen. Mr Carney, who met Mark Zuckerberg to be briefed about Libra a few months ago, has given the plan a cautious welcome. He recognises the need for innovation in the global payments system.
But he is clear that there will be rules from the start: “Welcome to the world of finance. There is oversight, there is consumer protection, there is market integrity – people have certain rights to privacy that have to be respected and we’re not going to allow a network that comes into place that is a network for criminals and terrorists.”
Facebook makes much of the fact that there are 1.7 billion people in the world who do not have a bank account. They face high costs and a cumbersome system when they want to send money to relatives far away.
A host of technology companies have sought to address this issue in recent times. Among them is UK-based TransferWise. Its chief technology officer, Harsh Sinha, tells us Facebook’s entry into this market is welcome.
“We took an approach of connecting directly into local banking systems across the world,” he tells us. Facebook’s coming at it from a different angle and trying to use blockchain technology. It’s an interesting perspective – and I think time will tell how things progress.”
He says there is a huge market to aim at, with room for lots of different approaches. But creating a new superfast blockchain and making sure the new system complies with regulations on money laundering and terrorist financing could be a lengthy and expensive process.
In the doldrums
The wider crypto-currency community is watching with interest. Until recently, bitcoin has been in the doldrums, hovering around the $3,000 (£2,300) mark after falling from a peak of nearly $20,000. But in the last month it has soared above $9,000 as rumours swirled about Facebook’s impending arrival on the scene.
Crypto-currency and blockchain advisor Kate Baucherel said there had been an expectation that Amazon or Apple, or some other Tech giant, might take the plunge into crypto-currency. She said Facebook’s move felt like “a real paradigm shift in the landscape”.
She admits that Libra – which is controlled by a central organisation – is a very different creature from the decentralised, open, neutral bitcoin. But she says there is a sustained rise in the use of crypto-currencies and in the application of blockchain technology, and Libra can only reinforce that trend.
We invited Facebook to appear on this week’s programme but the company directed us instead to its partners in the Libra coalition. The social media giant is all too aware that its recent data and privacy scandals mean winning trust in its ambitious currency plan will be tough. Its strategy seems to be to allow others to do the talking.
But with US politicians already calling for a pause in the project, it does not seem to be working.