The State Bank of Pakistan may have announced earlier this year that it is working on a concept of issuing digital currency by year 2025 to promote financial inclusion and reduce inefficiency and corruption.
The institutions in Pakistan may have been working at a snail’s pace to achieve the vision of digitisation and wait to adopt evolving realities of time and become fully digitised and technology-equipped by year 2030, the world has taken another step forward and central banks are already struggling to absorb the new reality.
Facebook revealed plans to establish a cryptocurrency called Libra and it will be run by an association comprised of other corporate investors and non-profit members, with an expected launch in the first half of 2020.Libra will be a digital currency backed by a reserve of real-world assets, including short-term government securities and bank deposits, and held by a network of custodians. The structure is intended to foster trust and stabilise the price.
Albeit, the prices of Libra may not always align with the underlying assets, holders should have a “high degree of assurance” that they can convert coins into traditional currency based on an exchange rate, according to the project’s information. Libra will trade on a network of exchanges, which Facebook did not identify.
In its Libra documentation, Facebook writes that “Success will mean that a person working abroad has a fast and simple way to send money to family back home, and a college student can pay their rent as easily as they can buy a coffee”. Libra is allowing consumers to buy things or send money to people with nearly zero fees which is common with credit cards .The users will be able to pseudonymously buy or cash out your Libra online or at local exchange points like grocery stores, and spend it using interoperable third-party wallet apps or Facebook’s own Calibra wallet that will be built into WhatsApp, Messenger and its own app.
Amid these developments the rising concerns have been echoed both in Europe and Capitol Hill in Washington. Germany and France unambiguously came out in a robust attack on Libra crypto currency, reiterating that it poses risks to the financial sector that could block its authorisation in Europe, and backed the development of an alternative public cryptocurrency. In a recent joint statement issued at a meeting of euro zone finance ministers in Helsinki, German finance minister, Olaf Scholz , and his French counterpart, Bruno Le Maire, said that the Virtual currencies pose risks to consumers, financial stability and even “the monetary sovereignty” of European states.
Policymakers and financial watchdogs in Washington and world are concerned about the effect of widespread adoption of Libra by Facebook’s 2.38 billion users on the global financial system. The chair of the US House Financial Services Committee Maxine Waters said in a statement that she remained concerned about Facebook’s plans for a digital currency as “allowing a large tech company to create a privately controlled, alternative global currency” is a matter of grave concern.
While the global authorities are still squabbling over Libra and its ricocheting impact which is threatening and challenging their role, the Pakistani authorities haven’t give it a much thought. The stat Bank launched regulations of Electronic Money Institutions (EMIs) and according to a senior state bank official EMIs are non-bank entities to be licensed by the central bank to issue e-money for the purpose of digital payments.
The only regulations which Pakistan’s central bank launched covered licensing procedure, governance arrangement, capital requirement, funds safeguarding arrangements, customer due diligence use of agents and interoperability. However, the only fact that’s missing is that Facebook is creating Supra-national digital currency which poses a direct threat to the governments and central Banks’ long maintained monopoly on the issuance and management of regional and reserve currencies.
Facebook is, right now, the dominant player in social media with more than 2 billion users on a planet of around 7.7 billion, and in Pakistan as of March 2019 31 467,000 users which accounted for 15.2% of the entire population. This exorbitant scale comes with unfathomable power and lots of scrutiny. While its ability to hold the high ground in years and decades to come is an open question, few would doubt the depth of the company’s resources today, whether financial, technological or the sheer number of eyeballs served.
Libra seems like a way to capitalise on Facebook’s dominance of today’s social media (and its partners’ industries) to kick-start a real, global network effect around a supra-national digital currency.
If even a fraction of Facebook’s user base converts to Libra, it’s on the path to becoming the largest and most profitable “financial institution” (albeit decentralised) in the world, an age of Neo-IMF based on retail banking or consumer, with reserves built up by consumers but which will give them the ability to do things very similar to what the IMF does.