Facebook's Libra a 'good idea', but still too many unknowns: panellists

Singapore

FACEBOOK'S embattled digital currency Libra may have faced fierce pushback from the get-go, but its attempt to solve the cross-border payments problem is still cautiously welcomed by some central bankers and private players.

Libra is "a good idea" for developing countries, where remittance costs can go up to 30 per cent of the amount being transferred, said Serey Chea, assistant governor and director-general of central banking in the National Bank of Cambodia.

Speaking at the Singapore FinTech Festival and Singapore Week of Innovation and TeCHnology (SFF x SWITCH) conference on Tuesday, she told a packed audience: "Now, if there is a solution where they can remit money across the border more cheaply and efficiently, that would be terrific, but, having said that, there are a lot of things that I don't know about Libra."

She was a member of a heavyweight panel addressing the topic "Defining the Future of Digital Currency"; the others were co-creator of Libra and head economist of Calibra Christian Catalini; director-general of China's Institute of Digital Currency Mu Changchun; and head of Digital Treasury Services and Blockchain at JPMorgan Chase Umar Farooq.

Libra was a hot topic during the 45-minute discussion. It is known as a "stablecoin", or a crypto currency pegged to a basket of fiat currencies, securities or commodities, so as to reduce its price volatility. Almost a quarter of the grouping originally backing the Libra project have pulled out, including payment firms Visa and Mastercard.

JPMorgan's Mr Farooq said the bank would "love to work with Facebook" to solve the problem of cross-border transactions, but that the problems with Libra are a lot more "basic", namely issues surrounding the legal movements of money.

Well-known risks of Libra include the potential threat of money laundering and terrorist financing, challenges to monetary sovereignty and financial stability, as well as privacy concerns.

Mr Mu said that privacy concerns in digital currencies are also an issue of which China is well-aware.

To address this, the Chinese government uses a technology known as "controllable anonymity", which allows people a certain level of privacy in their transactions, while also allowing the system to be scanned for online criminal activity such as money-laundering, terrorist financing, tax evasion and online gambling.

"That is a balance we have to keep, and that is our goal. We are not seeking full control of the information of the general public," he said.

China will soon be one of the first countries in the world to roll out a digital domestic currency, a primary goal of which is to diversify its electronic payment systems - currently dominated by just two players, AliPay and WeChat Pay, he said.

Unlike Libra, this digital domestic currency is not meant for cross-border payments.

Privacy issues aside, a greater worry for central bankers is stablecoin's potential interference of monetary policy. There has been increasing talk by central banks about creating their own digital currencies to counter the rise of Libra and other crypto currencies issued by the private sector.

But Libra co-creator Mr Catalini believes that these currencies can co-exist. "From the start, it was clear to us that eventually, central banks will be issuing some flavours of central bank digital currency, and we wanted the system to be future-proofed for that."

Central bank digital currencies would actually help to streamline the operations of Libra, which was meant to be a payment network, he said.

It "wouldn't make sense" to abandon Libra in that scenario as it will be more effective, allowing greater focus on enabling cheap and fast payments, he added.

Mr Farooq, on the other hand, said that he would be tempted to kill the JPMorgan coin if the US Fed comes up with its own digital currency. That being said, he added the caveat that it has to be "well designed", otherwise it could put at risk the current commercial banking system that runs the world.

JPMorgan in February was the first US bank to create a digital coin based on blockchain to enable instant payments between institutional clients.

Gazing into the crystal ball, Mr Farooq said the best-case scenario would be to have a few large global platforms that are inter-operable in terms of digital currency.

And the worst case? "Continued chaos and, frankly, this race to create more and more and more crypto currencies," he said.

For all of BT's coverage on this year's SFF x SWITCH, go to bt.sg/sffxswitch2019

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