Continue reading this on our app for a better experience

Open in App
Floating Button
Home News Cryptocurrency

Facebook's Libra might have a hard time in Asia

Trinity Chua
Trinity Chua • 3 min read
Facebook's Libra might have a hard time in Asia
SINGAPORE (June 24): Facebook is launching a digital currency that can be used seamlessly on mobile phones at near-zero fees. The social networking giant will also build its own mobile wallet, Calibra, which will act almost like a bank, hosting accounts,
Font Resizer
Share to Whatsapp
Share to Facebook
Share to LinkedIn
Scroll to top
Follow us on Facebook and join our Telegram channel for the latest updates.

SINGAPORE (June 24): Facebook is launching a digital currency that can be used seamlessly on mobile phones at near-zero fees. The social networking giant will also build its own mobile wallet, Calibra, which will act almost like a bank, hosting accounts, giving out loans and even having Calibra-branded ATMs.

Libra is developed as part of an association that includes MasterCard, Visa and Paypal Holdings; marketplace eBay; telco Vodafone Group; media service Spotify Technology; ride hailing service Uber Technologies; venture capital firm Andreessen Horowitz; and NGO Mercy Corps. Notably absent are banks. Indeed, when launched next year, Libra is set to undercut fees banks charge and serve the 1.7 billion “unbanked” people.

But that might be easier said than done in Asia. For one, regulators, already wary of cryptocurrencies, may not be quick to approve the new digital currency. Observers say they could pile on the regulation, or prevent Libra-to-fiat conversions, which would restrict its adoption. Regulators in the US and UK have already said they are closely watching the development of Libra. China, meanwhile, already has well-funded digital payment incumbents — WeChat and Alipay — which are likely to view Libra as a threat.

“Asia will potentially see this development contributing to capital flight westward,” says Richard Rosenblum, co-founder of GSR, a digital asset trading firm. To be sure, Libra is different from Bitcoin and other cryptocurrencies. It will be pegged to a basket of assets including short-term government securities. By contrast, Bitcoin’s decentralised nature is vulnerable to price fluctuations.

Still, how regulators view cryptocurrencies may be indicative of how open they are to Libra. China has outlawed cryptocurrency while Japan has tightened its regulations around cryptocurrency trading.

“In lightly regulated jurisdictions, Libra use would be open, but people will still prefer cash for tax reasons — 85% of the world still uses cash and more so in less economically developed regions,” says Alexander Kravets, CEO of trading technology firm XTRD.

Indeed, it is still unclear how Libra can be converted to fiat currencies in large emerging markets with poor infrastructure, says Rohith Murthy, founder of personal finance platform SingSaver. That would require significant costs to execute in local markets.

“If Libra is successful, cross-border transfer commissions could decline, especially for small transactions that tend to be [around] 5% currently. With many popular mobile wallets across each country, which can be loaded from nearby retail shops, the use case for Libra for paying merchants with QR codes or bill payments seems limited,” says Sachin Mittal, DBS Bank analyst. Many banks here have declined to go on record on Libra and whether it could disrupt their business, preferring to “wait and see”. One global bank says it is building its own digital infrastructure but will work with others. A local bank says it would wait for a signal from the Monetary Authority of Singapore.

If Libra is widely adopted in Asia, one bank says, financial institutions in Asia will try to find a role to work with the new digital currency. However, Facebook’s plans for Libra are likely to be otherwise. After all, Libra is being developed in association with other digital currency advocates. “Libra is such a large conglomerate it sends a winner-takes-all signal. So, any new development that stands a chance [against it] will need to be similarly large in scale and be across many payment verticals,” says Rosenblum.

Highlights

Re test Testing QA Spotlight
1000th issue

Re test Testing QA Spotlight

Get the latest news updates in your mailbox
Never miss out on important financial news and get daily updates today
×
The Edge Singapore
Download The Edge Singapore App
Google playApple store play
Keep updated
Follow our social media
© 2024 The Edge Publishing Pte Ltd. All rights reserved.