This article comes fromBloombergThis article comes from
Bloomberg
, by Leonid Bershidsky
Odaily Translator |
Several major payments companies have pulled out of Libra, the Facebook-led cryptocurrency project, due to regulatory pressure. Bloomberg, the top financial media, said that if Facebook really wants to bring financial services to the unbanked, it should first test it on a smaller scale than it promised. Even then, however, the chances of failure are high.
The reasons for PayPal, Stripe, eBay, Mastercard, and Visa dropping out of Libra are obvious. Senators Brian Schatz of Hawaii and Sherrod Brown of Ohio recently warned that, given the memberships of these payment companies (if they participate in the program), “it is foreseeable that regulators will not only target Libra-related payment activities. There will also be strict scrutiny of all payment activities by these companies. There are concerns that cryptocurrencies used in conjunction with encrypted communications may be used for illegal transactions. Anyone involved in creating such opportunities will be viewed with suspicion.”
U.S. regulators are perfectly capable of destroying large cryptocurrency projects. Just on October 11, the U.S. Securities and Exchange Commission (SEC) just took action against Telegram, a star encryption project that completed a $1.7 billion ICO, claiming that its token Gram was "illegally issued" and failed to comply with long-term disclosure responsibilities. Investors in Telegram ICO include mainstream American venture capital institutions such as Benchmark, Sequoia capital and Lightspeed. The same thing could easily happen to Libra.
That's the problem that large-scale startups will face. Telegram's ICO was the largest on record. In contrast, Libra, when the plan was officially announced, a list of partners was listed on its official website, which reads like a list of celebrities from all walks of life. Regulators and politicians will certainly be alarmed by the fact that Libra envisions a global launch of its cryptocurrency.
To avoid that outcome, Facebook could have tried a strategy that its partner Vodafone Group Plc has tried to achieve its goal of providing affordable payments and loans to the temporarily financially inaccessible. .
Vodafone launched a product called M-Pesa in 2007, Kenya's famous "mobile money", and one of the main advantages of the project was that the Central Bank of Kenya agreed to launch M-Pesa without any formal regulations . Vodafone's local mobile operator, Safaricom Plc, has quickly built a network of stores where the unbanked can pay and receive cash, and where older mobile phones have become wallets for money transfers and purchases. With no need to worry about regulatory interference, a large physical network and relatively generous commissions, M-Pesa had 37 million active customers in seven African countries by 2019.
But when Vodafone tried to port the service to other markets it failed. Vodafone has shut down M-Pesa service in India (partly due to regulatory hurdles), South Africa (low customer interest), Romania and Albania (apparently unprofitable). Vodafone discovered that there is no one-size-fits-all solution. Lenders, retailers and mobile operators offer competing services and regulatory scrutiny varies across countries.
To find countries that have launched such e-money services, you need to peruse lists of countries with large unbanked populations. The top 20 includes big countries such as China, India, Indonesia and Brazil, according to the World Bank.
Caption: In the past year, the ranking of the population over the age of 15 who has never used a financial institution account (from high to low)
But in these countries, most people already use some form of digital currency rather than dealing with traditional financial institutions. That’s why the picture looks quite different in the 20 countries with the lowest percentage of people who have recently made or accepted digital payments.
Caption: In the past year, the ranking of the population over the age of 15 who has never used digital payment (from low to high)
In other words, it is not easy to find a country where many people have neither bank accounts nor access to other financial services. In addition, cash users in certain countries may wish to maintain this status. One potential reason why M-Pesa is not working in Albania and Romania is that these countries have large informal economies with as much as a third of their gross domestic product (GDP) in the "shadow", electronically traceable Deals are unattractive compared to cash.
