Factual Dispatch #26: Libra & The Unbanked

After much initial clucking, the PR dust has settled on Libra, the not-exactly stablecoin/cryptocurrency announced by Facebook. For this week’s Dispatch, it’s an interesting vehicle (Editor’s Note: I hate you) to disrupt a couple of the more prominent populations/emerging markets right now. Those being Remittances and the Unbanked & Underbanked. But first…Libra, Calibra, and a not-quite decentralized blockchain.

Ostensibly before June 2020, Facebook and a League of Corporations, including Visa, Mastercard, Uber, Lyft, Paypal, Spotify, Farfetch (luxury/fashion), Coinbase (crypto) and Kiva (micro-loans) elected to join the Libra Association. This group will manage the Libra blockchain, be the only entities allowed to mine/mint more coins, and are on the hook to provide the Libra Reserve, that will back the currency, much like a Central Bank.

The Libra Whitepaper was surprisingly reassuring to me for a few reasons. There seems to be a clear expectation of a semi-swampy regulatory battle to get the trillion details right, and the powers that be aren’t rushing for once. Over at ETF.com, Dave Nadig makes a very compelling case that Libra is actually an ETF. For those not super excited to read about philosophical underpinnings of a new digital currency, or how the SEC classifies a nascent financial instrument, HackerNoon has a great tl;dr:

Anne Connelly has one of the better takes on Libra, which I’ll be coming back to a few times. While Mpesa operates in local currency, Libra will be backed by a basket of currencies and assets, creating a private/proprietary token. This is different from Bitcoin in a few very important ways. The best analysis of those difference between Libra, traditional BTC/crypto, and what people are calling a “Facebook Coin” was done by Ben Thompson at Stratechery.

Because only members are able to mint new Libra, and the currency is backed by a ton of real assets, Libra will theoretically be a much more stable “coin” than most of the chaos barometers that the cryptomarkets are peppered with these days. Not only will the cost per transaction be closer to SWIFT network tier than traditional crypto, with most of the digital infrastructure used daily by people already on board, it’s that much more likely the implementation will be frictionless. That is, if anyone trusts it. 

While these corporations may not always agree, they definitely all have an interest in this digital currency feeling as independent of Facebook’s tendrils as possible. If everyone just sees it as ZucCoin, the product is dead-on-arrival, as trust in Facebook is laughable. Uber, Andressen Horowitz, PayPal, and other companies in the Libra Consortium (I’m so mad they didn’t name it that) don’t have bulletproof reputations either, so adoption will be driven entirely by Libra as a new unconnected thing, not just from the tendrils of Facebook, but from any company in the Association.

The Wall Street Journal heralded the announcement as much needed competition for traditional banks and the dollar. The Marketing Guilds see the emergence of Libra as a great thing for e-commerce across borders, and they hope it can lend some purchasing stability to emerging markets. The Chinese government believes that Libra is an existential threat to the global financial system, and is demanding Central Bank supervision of the currency, but given the global imprint of these companies, how could you even enforce a directive that came from a single country or even the ECB? They’re so terrified of it, Chinese politicians are calling for the development of a version of their own cryptocurrency to be accelerated. While the monetary policy slap fight will continue, Libra’s unique advantage lies in Calibra, the wallet that is being developed for Libra to live in. Imagine if, instead of having to use the SWIFT network and Western Union to send money home, you could just send it over Facebook Messenger or WhatsApp?

The correct implementation of Libra and Calibra could ensure it takes a sizable chunk of the remittance market, which make up $500 billion outside of China. Western Union and the SWIFT network are just asking to be disrupted, and Libra might be the thing that does it. And it’s not just about sending money across international borders, it’s about giving millions of people around the world access to a financial system they’ve largely been locked out of: Over 25% of Americans are either Unbanked, or Underbanked. This infographic helps clarify just how fucked the financial apparatus 1 in 4 Americans have access to. (Source - Kubra)

While most of us take credit cards, or car/home/student loans for granted, a shockingly large number of humans across the world are forced to use exploitative products and given little opportunity to build purchase history or traditional credit. If Libra is successful, you have areas like Camden, New Jersey, or West Baltimore, where very little traditional banking is done, able to access financial products built on top of something other than their mattress. And it’s not just domestic, to truly understand the scope of Libra’s vision, you must think bigger. (Source - Times Of India)

What happens if a stable digital asset is able to replace fiat currencies in a bunch of the trash-tier economies around the world? While BTC or ETH couldn’t be used as a currency in Venezuela because of transaction costs, a stable currency like Libra built into WhatsApp could allow refugees, migrants, or traveling laborers to hold assets that wouldn’t depreciate if their dictator goes off the rails. Would you hold your wealth in a currency that could lose 30% of its value if the leader of your country develops a problem with stimulants? Zuckerberg could crash and burn, but he’d be only 1 of 28 (soon to be 100) CEOs the Association was populated with. The potential to be a check on bad governmental financial policy is one that shouldn’t be underestimated. On the flip side, I’ll just quote Anne Connelly directly:

As we see, Libra’s success is intertwined with its ability to separate itself from Facebook, Uber, and the sins of their father corporations. While Facebook has “ruled out” Calibra’s use in India, respecting the country’s flat ban on banks working with cryptocurrencies, the Libra Association has a number of members who have been quite successful “updating regulation” around the world to suit their needs. And now, for the first time, they’re working together.

In full disclosure, I did not install the Facebook app on my last 2 phones, and I am in no way invested in Bitcoin or crypto. But I absolutely use Messenger, and can immediately see the potential of sending money to my family in Morocco on WhatsApp, or paying for a Lyft in London using Libra instead of getting hit with a currency exchange fee from American Express.

 Eye-Watering Data Visualization of the Week: All the roads in Canada:

And, in case you weren’t sure, more Americans are working multiple jobs. (via The Daily Shot from WSJ)

Vaguely Dystopian News of the Week: In an effort to force restaurants to use their platform, Grubhub is buying your favorite joint’s domain in case the person running it hasn’t already picked it up. Also, a fantastic look at how America’s continued monopoly crisis has eroded the military’s competitive advantage and ability to fabricate complex machinery and weapon components.

Annoying-But-Correct Take of the Week: GDPR was dumb and kind of sucks. Also, Disney got the house style wrong in the new live action Mulan, as per…actual Chinese people from the region.

“Huh, Interesting” Read of the Week: Your “time in the patent office” might be valuable for your brain. Also, how Octopodes became brainy. Also also, human-cat relationships mimic parent-child relationships, in case your cat friends haven’t taught you that.

Royal Sampler

A great look at “Donor Advised Funds,” the latest infuriating financial boondoggle designed for the frustratingly wealthy.

The Philadelphia Inquirer produced an illuminating report on the lobbying done by Navient, Nelnet, and FedLoan, three of the more needlessly malevolent Federal Loan Servicers.

Sue Bird’s exceptional story of what it’s like to be Megan Rapinoe’s girlfriend while she operates at the highest level of sport while getting digitally yelled at by a guy who I’d pay 90’s Wrestling PPV money to watch walk up a particularly steep hill.

Malaysia arrested a bunch of foreign cosplayers for cosplaying without a license. I wish I was kidding. 

New York has restored about 30 million oysters to the waters around the five boroughs, and Hong Kong environmentalists want to bring that idea home.

A Kenyan writes about his Love-Hate relationship with Chinese traders that have come to his open air markets in the shadow of the Belt & Road Initiative.

So much of hip hop’s history resides in mixtapes, which are posing an interesting challenge for archivists.

In an effort to help us all keep up with the typhoon of old news stories, I’ve decided to test out a new section I’m going to call…

Meanwhile…

In Queens (FD#25): The upstart’s lead has dwindled entirely, with Katz now up by less than 20 votes. The vote heads to a 10-day recount, while progressives lobby Governor Cuomo sign a measure that would make it more difficult to invalidate affidavit ballots.

In Xinjiang (FD #5): Xinjiang continues its slide toward nightmarish dystopian panopticon, with staged PR visits to foreign dignitaries, forced monitoring app installs at the border, and full exploitation by companies like Google & IBM.

At Boeing (FD#16): Head of the 737 department stepped down, and it amazingly took that long.

In The World of Swine (FD#21): The Chinese Swine Fever problem might be 100% worse than previously expected. Amazingly, throughout this nightmare, the Chinese refuse to import US pork. Not because of the trade war, but because of the shit we put in it.

In Sudan (FD#19): The Sudanese ruling military council survived a coup attempt on the 11th? With a number of senior officers arrested, the transition away from the previous government continues, but progress is slow.

In New Orleans (FD#18): It’s so bad in NOLA, they were already flooded hours before the storm arrived. This bodes poorly for the region, given the feet of water Tropical Storm Barry is about to put down.

In Hong Kong (FD#23): The Hong Kong protesters have earned a brief reprieve with Carrie Lam declaring the extradition bill “dead” (but not withdrawn). The protesters, not resting on their laurels are broadening the movement and focusing on sustainability.

In Florida: Don’t consume pufferfish, and if you do…definitely do not do so while on cocaine. 

Dunk of the Week: This is pre-win, so it’s extra delicious.

The world’s tempo will quicken as the heat continues. What are you doing to cool down?T