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Facebookís cryptocurrency Libra claims to solve a very dire problem: helping people without access to banks. I have my doubts about how helpful Libra will be.
According to the white paper, the entire point of Libra is to ďenable a simple global currency and financial infrastructure that empowers billions of people.Ē The company claims LIbra will help give people access to a cheaper system of money transfers. Facebook cites a statistic of 1.7 billion people worldwide who donít have access to financial institutions, a statistic that originates with the World Bankís Global Findex Database 2017. Of these people, about 1 billion have mobile phones and 500 million have internet access. Insights like these have led to the phone-payment system M-Pesa, which already operates in more than 10 countries and does not use cryptocurrency.

Letís start with the obvious missing statistic: we do not know how many people have Facebook accounts but no bank accounts.
According to the report Facebook cites, half of all adults who donít have bank accounts are living in just seven countries: Bangladesh, China, India, Indonesia, Mexico, Nigeria, and Pakistan. In four of these countries, itís hard to see how Libra gets off the ground.
Facebook is banned in China. Some countries, such as Pakistan, Indonesia, and Bangladesh, have temporarily banned Facebook for periods of time, possibly limiting the effectiveness of any money tied to the app. Facebook mentions this as a risk factor to its business in its quarterly filing: ďGovernment authorities in other countries may seek to restrict user access to our products if they consider us to be in violation of their laws or a threat to public safety or for other reasons, and certain of our products have been restricted by governments in other countries from time to time.Ē
Thatís not all: many of these countries have laws around cryptocurrency. (Yes, I know it is debatable whether Libra qualifies as a cryptocurrency or not. But Facebook is calling Libra a cryptocurrency, so I am going to assume cryptocurrency laws will apply.) Indiaís current regulations mean Libra canít operate in the country. Pakistan is considering regulation for cryptocurrencies, but currently they are banned. Cryptocurrency is also implicitly banned in Bangladesh and China.
The big win here is possibly Indonesia, which just legalized trading cryptocurrencies, and was also called out by Facebook in its most recent quarterly filing as an area of growing daily active users.

But the majority of these countries have substantial hurdles for Libra adoption. This might explain why Libraís founding partners arenít based in any of these countries. (MercadoPago, an online payment company thatís also one of the partners, does operate in Latin America and is based in Argentina.) No founding Libra partners appear to be based in Asia or Africa, either ó and thatís where the people without bank accounts are, according to the World Bank stats. It isnít impossible to see something like Libra taken up, but it will require local support; most countries have a thicket of regulation around banking. It doesnít look like Libra has summoned any local support yet in the places it matters most.
The white paper contains some detail on Libraís architecture. Still, thereís little discussion of why people donít have bank accounts. According to the World Bank data Facebook is citing, almost two-thirds of people who donít have bank accounts say itís because they donít have enough money to open one. Libra does not solve that problem. A third of people who donít have bank accounts said they donít need one. No need for Libra there, either.

Libra solves only the less popular reasons people donít have bank accounts. About a quarter of respondents said banksí high and unexpected fees were at least part of why they didnít have accounts; distance to a bank was a barrier for another 20 percent. So these people would seem to be Libraís target audience.
Thereís sort of a subtle hitch here, though: to use Libra, you have to buy Libra. Iím not the first to notice it; the Financial Timesí Brendan Greeley has written about the same issue. The papers themselves seem to be considering their end user to be someone like me, a lady with a bank account and a credit card. The process of converting to Libra is described pretty much how I would experience it: you log on and give them your credit card number or bank account number.
Problem is, people who do not have banks do not have bank account numbers and they may not have credit cards, either. They have cash. ďThereís nothing about how Libra will lower fees to convert fiat cash into Libra money, which is both the essential challenge of consumer banking and an explicit part of Libraís problem statement,Ē Greeley writes. ďCheck-cashing places charge hideous fees, but theyíre willing, on demand, to turn physical checks into physical cash, and physical cash into transfers.Ē
As for mobile banking, uptake has been patchwork. M-Pesa has been successful in Kenya. But in Nigeria, people still prefer cash because they worry if their phones are stolen, their money will be gone, too. This is a problem of social norms, not engineering. Clashes between telecoms and banks hamstrung mobile banking applications in Nigeria. This, too, is not a problem you can solve through engineering. There are other, more mundane problems when it comes to mobile banking as well, like the cost of having inactive customers.

Itís not clear to me why a mobile payments service like the one Facebook is proposing requires cryptocurrency at all. It seems like a non-starter in many of the markets where mobile payments might be most needed. And Libra doesnít address the main problem the documentation says itís setting out to address.
From the documentation Facebook has given, a reasonable person might conclude that the problem statement exists entirely as a smoke screen. Libra isnít meant for people without bank accounts; itís meant for people who already have money. Facebook is a business; businesses need to make money; as we have seen, people without bank accounts mostly donít have money.
Thereís one more kink in the documentation, which Coindeskís Ian Allison first spotted: ďAn additional goal of the association is to develop and promote an open identity standard. We believe that decentralized and portable digital identity is a prerequisite to financial inclusion and competition.Ē If Facebookís problem statement is a sham, then the portable digital identity is another plausible end game.
Look, itís fine that Facebook is building a money app for the privileged class. Thatís typical Facebook, actually! But I do not believe Facebook is doing this for the greater good. Reading the documentation, itís hard to escape the conclusion that all Facebook is doing is trying to dream up a new way to line its own pockets ó whether thatís Libra or an open identity standard. Or, you know, both.