Community

Having just listened to Joe Kernen on CNBC, and Mnuchin last night, I am confused as to what they may be seeing in the Libra project which is totally at odds to my view. 

Kernen says Libra has no value, unlike Bitcoin which he sees as a product of assured value. I cannot understand how a 'currency', such as Libra, which is 100% backed by the leading fiat currencies of the world (and all funds held in their government paper or in accounts in their leading banks) is other than secure in a way that Bitcoin can never be. 

He also confuses the distributed ledger methods used for Bitcoin, which are both slow and involve heavy usage of power, with the fast, low power requirement of Libra.

I understand the US administration may have doubts about Facebook's role, as a US-based company; I am not sure if they are also concerned about the majority of the 27 other companies (with equal roles in the Libra association) which are American? Does it not occur to any of them that it might be better not to block from offering a very valuable payment methodology to the two billion Facebook users around the world (many unbanked), than leave this to the Chinese organizations? 

I wonder what the Swiss government makes of a Swiss non-profit association, with multiple large company ownership, being subjected to control from DC? 

Perhaps the answer is for Libra to block any business from USA - and service all other countries - until there is an administration there who understand the enormous value of enabling, at the very least, remittances to be transferred at 1% as against the current 7%? 

It may mean that only ecommerce merchants from other than USA would be able to work over the network as well? A silly idea, of course, but perhaps not as silly as the objection being expressed in DC, including confusing LIBOR with Libra!       

I would suggest this is a dangerous area for Facebook to raise at this early, but critical, stage. The appeal of Libra is as a low-cost payment vehicle for many people around the world, with a weighted value of the leading currencies. The proposal is that all funds are held in government paper or bank accounts - of just the leading six or seven currencies - for a fully secured value. 

If Facebook talk of getting involved in loans and other financial services, it raises a question as to whether the security funds are going to be used for any of this? The answer should be a guaranteed "no", with the other foundation members similarly confirming that Facebook will not have access to the funds for whatever else it wants to do in other ventures.

It is going to be the biggest issue for Libra; government regulators want to be assured this is not a trojan horse. Hopefully Facebook will clarify this - and avoid giving what could be misleading commentary on non-connected potential projects? 

The concern of regulators is mainly regarding KYC and AML, leading to tax evasion and lack of control of money supply. There are issues to be faced, particularly in countries where the black economy is paramount and the fiat currency is frequently being devalued.

But there ways to address each of these matters, too long to go into here.

What I believe should be appreciated is the enormous good that can be done for often the poorest in the country, i.e. those relying on remittances from abroad or aid from charitable organizations.

Being able to cut the costs of such transfers, primarily using Libra (or other new 'currencies') to virtually zero - from an average of 7% - i.e. $70 billion extra value on the $1 trillion pa market - is only part of the value for the recipient government.     

The added value is the improvement in GDP and, from that, the better credit rating - leading to lower financing costs on international debt.

Note that while the recorded amount of international remittances is currently closer to $600 billion, this excludes the hidden Hawala-style payments; these can be even higher than the official ones in some countries. A structure where the price is down to almost zero will, we believe, bring across much of this business. It will, therefore, in turn help goverments disrupt the remaining criminal activity, for a benefit and improvement in the very areas it is concerned about above, i.e. AML and tax fraud.

So, while there is much to be done, hopefully regulators and governments will look at the overall potential for good, not just the risks involved.       

While it is fair to say that the entry of the FAANGs to financial services does need oversight, I think they can be checked more easily than many of the existing and new entrant banks. They have sophisticated accounting structures for their core business - and the whole point of entering the financial markets is to improve their other services, so they will be well-integrated.

One area where the can make a big difference is in the delivery of remittances and aid payments at a much lower cost. It is ridiculous these payments often carry somewhere between 7% and 12% fees; when offset against purchase of goods and services by others in the recipient countries (from Amazon, Facebook or Google), the fee can be less than 1%.

As for China having only two such services, we should remember Visa and Mastercard still have a similar format for most of the Western world - and certainly  do not act in a competitive manner in managing their clients interests. 

So, bringing in other alternative payments is probably going to be very good for virtually everyone; as long as it is done in a controlled, reportable manner.    

I have to agree with Maas that an alternative payment structure should be created, but it is more a case of an international alternative to the dollar. The current US administration is using dollar dominance - and its chosen bully boy trade sanctions policy - to intimidate other countries  and companies (not just EU) into actions against their governments' policies.

Of course it is not easy; it is clear that the euro is not strong enough as an alternative currency itself, but a broader base alliance of countries/ currencies should be in everyone's interest, including the vast majority of US businesses that wants a return to 'normal' diplomacy. 

Working with Japan, India, the rest of Europe etc. could generate a viable option for trade, reverting to national fiats on forward-dated settlement schedules. A world where reserves are held in dollars, yuan and the mega-blend currency could bring greater financial security for all - and a chance to counter extreme political pressure. 

The arrival of DLT, and the use of smart contracts, can resolve much of the SWIFT/ correspondent banking issues as a fundamental part of the solution. Hopefully Macron can push the EU in this direction - and Merkel does not stay as negative as her put down of Maas suggests.   

I agree with Paul's point; I think the only reason for not treating this as a  cash advance is that it suggests it is a currency, something being resisted by the authorities.

The other factor explaining a number of the banks' attack on cryptocurrencies is an attempt to link blockchain transactions as connected to the problem. The much lower costs of blockchain, particularly for international trades, is something banks wish to discourage, at least until they a get chance to catch up on the technology - which will probably take around five years in most cases. 

Back to Lloyds; the ban is solely (for now) on credit card transactions, not on debit cards, just to be clear on that.  

There needs to be a rethink on the use of Personal Identification Numbering, particularly if managed by a strong biometric, such as iris scanning. It was pitifully explained a few years ago, causinga backlash against 'big brother' factors; what now needs to be explanied is how, without assurance from it, we have opened up our whole data to every criminal in the world.

Your eye is unique - from 18 months of age it can help secure all medical, educational and financial data at a 100% level for the rest of your life. We need a small, time-intensive study on how to manage and better explain this - before it is too late. The rewards can be immense; the cost of delay too horrible to contemplate.

Depending on costs - what are they, including buy/sell spread? - this could be a very popular product. Is it scaleable to much higher numbers, particularly in times of crisis? 

I agree with that comment .. non-profits should get all the help possible from payment processors.

But at least this is a start with ApplePay; what is surprising is Google's latest paayment tool that specifically blocks its use for non-profits at all. On asking why, no reason is given; "it's in the rules" was the best I could get. Anyone able to explain better than that?   

It would be helpful to have some analysis of the different biometric solutions currently available, not least to avoid misunderstanding the actual risk basis of each. The presenter refers to 100% accuracy, which I agree is available through iris scanning, but I feel is over-stretching the claim for facial recognition and fingerprinting.

That is not to take away from the primary point that biometrics are a great improvement; its just that everyone should consider which is the best before spending too much on what can still be hacked or have technical flaws. We would be happy to work with others on such a comparison survey if it is seen to be helpful.