Libra: much more than just a cryptocurrency. The right to (financial) inclusion

Saul Sabbá – CEO Shevar Investments

Facebook’s announcement of its own cryptocurrency with a consortium of big hitting payment service providers like PayPal, Mastercard, Visa and some of the leading companies in the sector,  has generated great expectation and an explosion of interpretations from a wide variety of institutional and technical branches, as well as financial agents such as the central banks of various countries.

We all know that the current financial system appears to be perfect, but that’s far from being the reality. Since the 2000  attack on the World Trade Center, the world has changed considerably and we can’t say it’s changed for the better. Thus, the financial world created structures to shut down economic freedoms like never before, because following the implementation of antiterrorism controls on capital flow, there was the systemic banking crisis of 2008, resulting from the so-called “toxic assets” or subprime bubble.

In conjunction with anti-terrorism compliance controls, came banking regulations imposed by regulatory bodies, which regulated and moderated capital according to the criteria that capital should only be for those included in the right concept of equity, in other words, capital against collateral, whether real estate, receivables or similar. Likewise, a barrier to entry into the active economy was created. In other words, transfers and other bank movements are only for the masses proven to be employed within the regulated labor system.

Preventing banking inclusion for those who are not proven to have a formal working relationship makes life very difficult for those in cities or rural areas who are economically productive. Consider Brazil alone, for example, and we can say that 40% of the population fall outside formal employment. Libra has its eye on those people who don’t have a bank account but have a cell phone and could connect financially with the world through this payment method. Incredibly, it would bring some degree of economic inclusion to  millions of people who connect via the internet and cell phones.

Why a cryptocurrency and not a real asset, as many accustomed to current regulation think? Where is the security?

Today, the security of all currencies is credibility. In this sense, Facebook’s proposal is comprehensive and surely will be used by millions of people who feel unassisted in even the smallest financial movements, replacing the role of currency definitively. That’s how true financial inclusion could happen. Remember that today you need your CPF (social security) number or cell phone to use any payment method, be it credit card or transfer, and this in turn will function like a wallet or ID. The new world is coming.

Just to corroborate my support for this proposal, for some time I have been adopting my position on  cryptocurrencies and blockchain, which is also a revolution in technology and cutting back bureaucracy. These days, we no longer own our money nor can we move it freely. If, for whatever reason, you want to take your declared money and simply withdraw or move an amount which is not normally accepted, you already become suspicious for compliance. Currently your right to move money is no longer part of the mainstream banking system.

How are we doing today? In my view, the Libra proposal is widely favorable. Undoubtedly, regulations will have to follow swiftly so that we don’t end up with mechanisms with no criteria for controlling their misuse. Regulatory bodies are there for this very purpose, to keep technological  advances in order, so that it doesn’t become another mechanism for corruption and siphoning off taxes.

Nowadays, the global dominance of a currency is very worrying, especially for emerging countries which don’t produce many dollars or euros and need to have an absurdly large foreign currency reserve just to protect themselves from currency devaluation. It is not productive and raises the question of why there is no alternative trade between smaller countries, which doesn’t have to depend on the euro or dollar but on their own national currencies.

We know that the answer is their lack of credibility and we can point to Brazil and Argentina as cases in point.

So to conclude my reasoning, something that facilitates payment methods would greatly help the world because, contrary to those who think Facebook would maintain control, that’s not how I see it. In a consortium, the company would have one vote just like the others. Another level of security is blockchain’s very own system which is inviolable, one of the tool’s innumerable benefits. I understand why some authorities are afraid and I respect the opinion of the divergent arguments on this controversial subject. What Facebook is proposing, however, is an option to use the Bitcoin system, which is better and more organized, since bitcoin’s use is still based on speculation, with high volatility and thus doesn’t function as a useable currency.

Anyhow, it’s worth our while to think about this new world.

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