AUSTRAC has ordered the appointment of an external auditor to examine ongoing concerns in regard to PayPal Australia’s compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (the AML/CTF Act).
These concerns relate to PayPal Australia’s compliance with its
International Funds Transfer Instruction reporting obligations, which
require regulated entities to report the transfer of funds or property
to or from Australia.
International Funds Transfer Instructions reported by the financial
services sector provide AUSTRAC with vital intelligence that enables
AUSTRAC and its partners to combat serious crimes such as child sex
exploitation.
AUSTRAC Chief Executive Officer, Nicole Rose PSM said the AML/CTF
regime is in place to protect businesses, the financial system and the
Australian community from criminal threats.
“Regulated businesses like PayPal Australia, who facilitate payments
and transactions for millions of Australian customers every year, play a
critical role in helping AUSTRAC and our law enforcement partners stop
the movement of money to criminals and terrorists,” Ms Rose said.
“PayPal is an important partner in the fight against crime. However,
when we suspect non-compliance AUSTRAC will take action to protect the
Australian community.”
The external auditor must report to AUSTRAC within 120 days of being
appointed and will examine PayPal Australia’s compliance with its:
AML/CTF Program obligations
International Funds Transfer Instruction (IFTI) reporting obligations
Record keeping obligations.
The outcomes of the audit will assist PayPal with its compliance, but
also inform AUSTRAC whether any further regulatory action is required.
“We will continue to work closely with PayPal during this process to address any compliance concerns,” Ms Rose said.
The extent of the auditor’s examination is determined by AUSTRAC and will be at PayPal Australia’s expense.
We look at the future of cash in the light of the emergence of a global digital currency, and the paper released for discussion by the Reserve Bank of New Zealand.
Mark Carney, Bank of England Governor has given a given a significant speech at the Jackson Hole symposium in which he outlines some potential steps to a new global currency. He argues that just as Sterling transitioned to the US Dollar in the 1930s’s, something similar could occur again. But rather than having a battle of competing reserve currencies, perhaps an alternative path is possible via a Synthetic Hegemonic Currency (SHC). This might be based on a network of central bank digital currencies, rather than something like Libra.
This folks is a big deal – when aligned with the reduction in cash, the migration to digital currencies, and globalisation. The potential implications are immense!
Technology has the potential to disrupt the network externalities that prevent the incumbent global reserve currency from being displaced.
Retail transactions are taking place increasingly online rather than on the high street, and through electronic payments over cash. And the relatively high costs of domestic and cross border electronic payments are encouraging innovation, with new entrants applying new technologies to offer lower cost, more convenient retail payment services.
The most high profile of these has been Libra – a new payments infrastructure based on an international stablecoin fully backed by reserve assets in a basket of currencies including the US dollar, the euro, and sterling. It could be exchanged between users on messaging platforms and with participating retailers.
There are a host of fundamental issues that Libra must address, ranging from privacy to AML/CFT and operational resilience. In addition, depending on its design, it could have substantial implications for both monetary and financial stability.
The Bank of England and other regulators have been clear that unlike in social media, for which standards and regulations are only now being developed after the technologies have been adopted by billions of users, the terms of engagement for any new systemic private payments system must be in force well in advance of any launch.
As a consequence, it is an open question whether such a new Synthetic Hegemonic Currency (SHC) would be best provided by the public sector, perhaps through a network of central bank digital currencies.
Even if the initial variants of the idea prove wanting, the concept is intriguing. It is worth considering how an SHC in the IMFS could support better global outcomes, given the scale of the challenges of the current IMFS and the risks in transition to a new hegemonic reserve currency like the Renminbi.
An SHC could dampen the domineering influence of the US dollar on global trade. If the share of trade invoiced in SHC were to rise, shocks in the US would have less potent spillovers through exchange rates, and trade would become less synchronised across countries.
By the same token, global trade would become more sensitive to changes in conditions in the countries of the other currencies in the basket backing the SHC.
The dollar’s influence on global financial conditions could similarly decline if a financial architecture developed around the new SHC and it displaced the dollar’s dominance in credit markets. By reducing the influence of the US on the global financial cycle, this would help reduce the volatility of capital flows to EMEs.
Widespread use of the SHC in international trade and finance would imply that the currencies that compose its basket could gradually be seen as reliable reserve assets, encouraging EMEs to diversify their holdings of safe assets away from the dollar. This would lessen the downward pressure on equilibrium interest rates and help alleviate the global liquidity trap.
Last week the Judge delivered his verdict in the ASIC-Westpac HEM case, essentially because of the ~260,000 loans examined in the case less than 5,000 would have potentially had their loans tweaked lower if the HEM was not used, whereas the bulk of the loans would have been bigger if HEM was not utilised in the decisioning.
I have now had the chance to speak to a number of industry
players, and most have fallen into expected camps. Lenders in the main welcome
the decision, suggesting that common sense has prevailed, and that ASIC was not
reasonable in its interpretation of responsible lending guidelines. On the
other side, consumer advocates are calling for tighter controls and suggesting
that the HEM benchmarks, even in their revised form are too low – meaning that
households are committed to servicing loans they cannot afford. And ASIC has
commenced a review of responsible lending by years end.
But among my conversations on this topic, I found a sensible and balance view expressed by Fintech CEO Mark Jones from SocietyOne. They of course are on the cutting edge of technological innovation through their lending processes in Australia.
Mark made the point that recently lenders have been raising
their standards, but the question becomes whether a lender has to try and
uncover untruthful declarations from prospective borrowers. In Australia there
is no clear-cut legal obligation of borrowers to be honest and transparent in
their declarations, whereas in the USA there is such a legal obligation, and in
New Zealand a Code of Conduct.
He cited examples where applicants had clearly lied on loan
application forms.
What is the right balance between asking in painful detail
for information from applicants, some of which are unsure of their specific
spending patterns, and the fact that in any case if they take a loan, they may
be capable of “life-style modification”?
So, he sees HEM in the context of the broader loan
assessment processes, with data from applications tested again HEM, and
additional dialogue around other unusual commitments which might include school
fees, alimony, and other elements. This
is all around knowing your customer. And
there needs to be a focus on both discretionary and non-discretionary categories
to give a complete picture.
The systems which Fintech’s like SocietyOne use are more sophisticated and can handle the complex algorithms which reflect real life. Positive credit and now Open Banking, both of which are arriving, are helpful in uncovering critical information. As a result, there are better outcomes for customers. No lenders want to make a loan which is designed to fail! And it opens the door to more sophistication around risk-based pricing
So, in summary, the trick is to get the right balance between getting every scrap of potential data from a customer, thus getting bogged down in the detail but missing the big picture; and applying simplistic ratios which do not provide sufficient precision to spot good and bad business. And it is this balance which needs to be defined in responsible lending, to a level which passes both community expectations and the operational requirements of lenders. To that end, the debate should not really be about HEM at all!
The ACCC says that Australians are set to lose a record amount to scams in 2019, with projections from losses reported to Scamwatch and other government agencies so far expected to exceed $532 million by the end of the year, surpassing half a billion dollars for the first time.
This year’s National Scams Awareness Week
(12-16 August) theme is “too smart to be scammed?” and the ACCC, along
with over 100 campaign partners from government and industry, is urging
consumers to test their scams knowledge and refresh their scam
protection and detection skills.
“Many people are confident they would never fall for a scam but often
it’s this sense of confidence that scammers target,” ACCC Deputy Chair
Delia Rickard said.
“People need to update their idea of what a scam is so that we are
less vulnerable. Scammers are professional businesses dedicated to
ripping us off. They have call centres with convincing scripts, staff
training programs, and corporate performance indicators their
‘employees’ need to meet.”
Investment scams are one of the most sophisticated and convincing
scams and continue to have the highest losses. Nearly half of all
investment scams reported this year resulted in a financial loss.
These scams are prominent on social media, with ‘Facebook lottery’
scams, the ‘Loom’ pyramid scheme, and cryptocurrency scams particularly
common.
Cryptocurrency investment scams have seen record losses, with reports
to the ACCC alone of $14.76 million between January and July 2019. Many
use social media platforms, fake celebrity endorsements or fake online
trading platforms that are made to look legitimate.
Protection advice
“Our advice is to be wary of ads you see on the internet. Don’t be
persuaded by celebrity endorsements or ‘not to be missed’ opportunities.
You never know for certain who you’re dealing with or whether they’re
credible,” Ms Rickard said.
“If you think you’re speaking to a friend on social media, call them,
or find another way to contact them before acting on any advice that
might result in you giving away your personal details or money.”
Scamwatch also suggests that people check ASIC’s list of companies you should not deal with.
If the company that contacted you is on the list – do not deal with
them, and even if they are not listed, continue researching and speak to
a financial advisor before investing.
Be vigilant on social media, when shopping online and when answering
the phone, and never give anyone who has contacted you out of the blue
your personal details, banking details or remote access to your
computer, no matter who they say they are. It’s best to assume scammers
are everywhere, waiting for you to let your guard down.
“Remember, anyone could fall victim and no one is ‘too smart to be
scammed’. Always ask yourself, ‘could this be a scam?’ and if you’re
ever in doubt, decline the contact or hang up the phone – it’s often the
safest option,” Ms Rickard said.
The ACCC has produced a series of videos with tips and tricks on how to spot a scam, and to test people’s awareness of scams. The full series is also available on YouTube.
The open banking regime officially began yesterday with the four major banks offering data on a variety of products as part of the regime’s roll-out, via InvestorDaily.
The
four major banks had a deadline of 1 July to make product data
available on all credit and debit card, deposit and transaction accounts
with more products to follow.
By February, first mortgage data
will have to be available, with eventually all products being available
for the major banks by 2020. 1 July 2020 is the start date for all other
banks to begin offering their credit and debit card product data with
an end date of 2021.
Customer data will be included in the regime
by 1 February 2020, which will allow consumers to more fully control
their data and enable greater transparency and competition throughout
the industry.
Open banking has been sweeping across the world, with the most relatable example for Australia being the UK open banking regime.
The
UK introduced theirs following an exposure of poor practice, not
dissimilar to Australia. Where it differs though is that the UK regime
applies to only nine banks, whereas Australia’s will apply to all ADIs.
The
Australian regime only grants read-only access to data with reciprocal
obligations and an eventual plan to open to other industries, such as
utilities.
What it will eventually mean is that customers of a
bank can request or give consent for their data to be shared with an
accredited third party, such as a bank, financial services provider,
utility provider or a telecommunications provider.
The regime will
break down the barriers consumers have faced in finding the best
banking products and eventually switching to that provider.
Commonwealth
Bank’s general manager of digital banking, Kate Crous, told Investor
Daily that the bank was supportive of the model that puts customers in
control and had worked hard to ensure they were ready.
“We have
worked hard with regulators and other industry participants to ensure
the Consumer Data Right regime will be successful, particularly in
building consumer trust and confidence around the use and exchange of
their data.
“The first milestone is publishing product information
via an application programming interface (API) from 1 July 2019. This
will enable an easier comparison of banking products from financial
institutions and allow the industry to test the APIs before sharing
consumer data next year,” she said.
Ms Crous said developers are now able to access information on how to integrate with the CBA APIs.
Westpac’s chief data and strategy officer, Jamie Twiss, said keeping data safe was crucial and the pilot was an important step.
“Westpac
is focusing on creating a trusted open banking regime that is secure,
flexible and easy to use for all Australians. The pilot program will lay
initial foundations to test the performance, reliability and security
of the system before any personal consumer data is shared. It will also
give software developers and fintechs a network of financial
institution’s data to build and improve financial services.”
Westpac
will provide generic information on product data as of today, which
will include interest rates, discounts, eligibility criteria, product
features and descriptions plus fees and charges.
A NAB
spokesperson told Investor Daily that their focus was on ensuring that,
as an industry, open banking worked for the consumer.
“This is a
complex change to the industry and the timelines are challenging, but we
firmly believe that speed shouldn’t compromise safety and customer
experience; getting it right is paramount to consumer trust and
confidence in the system,” NAB said.
The spokesperson
said NAB had actively started to develop processes since back in 2017 to
be ready for open banking and would continue to work with Data 61 and
ACCC.
Fintech response
Deputy chief
executive of neobanks Volt Luke Bunbury said it will mean that the
incumbent banks will need to innovate to compete with newer entrants.
“This
means the incumbent banks will have to innovate to compete, as there
will be a long line of fintechs and neobanks like Volt wanting to
harness this data to offer customers a superior banking experience.
“Customers
will be the masters of their data, and third parties will have to earn
it by being innovative and trustworthy,” he said.
Part of this was changing the narrative by offering an improvement to lives and not just the sale of products, said Mr Bunbury.
“Volt
and other innovative banks will be able to help Australians find and
secure better deals on a range of banking and even non-banking services,
like utilities and travel.
“By enabling data to be shareable
across financial institutions, it will be also possible for customers to
manage multiple bank accounts from one mobile app, regardless of
whether the accounts are held with rival banks,” he said.
Chief executive of Verrency David Link said the regime was going to eventually drive greater innovation.
“While
1 July 2019 will not drastically change the way Australians bank – as
only product, rather than customer, data will be available until 1
February 2020 – this is a huge step towards that much more
transformative change,” Mr Link said.
Banks would have to start to
offer a personalised consumer offering, said Mr Link, and those that
are agile were going to thrive.
“The effective use of data and
access to new value-added services will slowly become a major
decision-driver for consumers when it comes to choosing or changing who
‘owns their relationship’.
“Banks which don’t take this extremely
seriously are going to slowly struggle to remain competitive. On the
other hand, those which take steps to become more agile – especially in
their ability to deliver value around the consumer relationship – are
going to thrive in the post-open banking landscape,” he said.
Cryptocurrencies have become a global phenomenon in the past few years. Now Facebook is launching it’s own cryptocurrency, in association with Visa, MasterCard, Uber and others. The stated aim of Libra is to “enable a simple global currency and financial infrastructure that empowers billions of people”. Via The Conversation.
But let’s go back to the basics and look at what Libra is, how it
compares to other cryptocurrencies and whether you should be concerned
about using it when it eventually arrives.
What is a cryptocurrency?
Currency is a system of money that is commonly used in exchange for
goods and services and, as a result, holds value. Cryptocurrencies are
digital currencies that are secured using cryptography.
The more popular recent cryptocurrencies are based on blockchain
technology which uses a cryptographic structure that is difficult to
change. One of the key properties of this structure is a distributed
ledger that keeps account of financial transactions, which anyone can
access.
What is Libra?
Libra is a new currency that is being proposed by Facebook. It’s
considered a cryptocurrency because cryptography will be used to help
protect the value of the currency from tampering – such as double
spending – and to protect the payment process.
Libra has the potential to become successful because of the backing from the Libra Association,
which is made up of large international corporations such as Facebook,
Uber and Vodafone. MasterCard and Visa have also thrown their hats in
the ring, but no traditional banks are on the list.
What’s different about Libra compared with other cryptocurrencies like Bitcoin?
Cryptocurrencies like Bitcoin and Ethereum are quite egalitarian in
nature. That’s because there is no single authority that verifies
transactions between parties, so anyone could potentially do it.
To authorise a Bitcoin transaction you would have to prove that you have done the work, known as a “proof of work”.
For Bitcoin, the proof of work is to solve a mathematical puzzle.
People who successfully solve the puzzle (proving they have done some
work), can add transactions to the blockchain distributed ledger and are
rewarded with Bitcoins. The process is known as mining.
The good thing about this is that it reduces fraud. Since anyone can
potentially mine Bitcoins, it’s harder to collude as you wouldn’t know
who the next person to mine a coin would be. And it’s simple to verify
that the person is authorised because anyone can check that the puzzle
has been solved correctly.
Based on the initial descriptions of the currency, it sounds like the difference with Libra is that it will verify transactions using a consensus system known as “proof of stake”,
or a variation of this method. Under this system, transactions would be
authorised by a group of people who have a stake or ownership in the
currency.
This makes it easier to predict who the next person to authorise a
transaction might be (since there are a relatively small number of
authorising group members), and then collude to launder funds without
other group members knowing.
It appears
the criteria to become a founding member of the Libra Association is to
contribute a minimum of US$10 million entrance fee, have a large amount
of money in the bank and be able to influence a large number of people.
What are banks and regulators worried about?
Cryptocurrencies affect governments and tax systems since they have
little to no transaction costs when money is transferred across borders.
So while the low transaction costs would be good for everyday users,
the advent of a new cryptocurrency with a potentially very large user
base has governments and traditional banks very concerned.
While Libra is open source – meaning the source code is available for
all to view, use and modify – it’s the members of the association who
will be overseeing the currency. Libra could herald a shift away from
traditional government taxes and banking fees to a new international
monetary system controlled by corporate entities like Facebook and Uber.
That’s a concern because of the lack of oversight from regulatory
bodies.
What should everyday people expect from Libra?
The backing of software giants means it’s likely that the user interface for Libra coins would be smooth and simple to use.
Low transaction costs would benefit users and the Libra Association
promises to control the value of the currency so that it does not
fluctuate as much as other cryptocurrencies. It’s unclear how they plan
to do this. But value stability would be a great advantage in times of
uncertainty.
What are the risks?
The everyday consumer probably wouldn’t know the difference between
the “proof of work” and the “proof of stake” mechanisms. But since
Facebook has a large database of users that are known to use Libra, it
may be able to link Libra transactions to individuals. This could be a
privacy concern. (Bitcoin transactions are anonymous because account
numbers used in Bitcoin transactions are not linked to an individual’s
identity.)
Recent cybersecurity breaches
have contributed to a growing awareness of the vulnerabilities of IT
systems. As with all software, the Libra implementation and management
could be vulnerable to attack, which in turn could mean users could lose
their money. But that is a risk that all cryptocurrency users face,
whether they are aware of it or not.
What steps could consumers take to protect themselves?
No matter what cryptocurrency you choose to use, your funds are still
accessible through the same interfaces: a web page or a mobile app. And
the way you control access to your personal funds is by authenticating
with a password.
Make sure you keep your password safe by making sure it is
complicated and hard to guess. Look for applications that allow you to
use two-factor authentication and make sure it’s turned on.
Libra is yet to prove its claims of making financial transactions safe and convenient. Only time will tell if its uptake will become widespread following its expected launch next year.
Author: Ernest Foo, Associate Professor, Griffith University
On 20 June, the Bank of England announced plans to facilitate the UK economy’s adoption of new technology through a more open financial infrastructure, via Moody’s. Although many of these plans would ultimately enable faster adoption of new technology with broader and cheaper access to financial services, they would likely be an overall credit negative for incumbent banks, which generate profits thanks in part to high barriers to entry and privileged access to data.
The Bank of England’s announcements include a variety of proposals including better infrastructure to improve payments, easier access to finance for small and midsize enterprises (SMEs), smoothing the transition to a lower-carbon economy, reducing the regulatory burden on the financial industry, and facilitating the adoption of cloud-based technologies to increase operational resilience.
Some of these initiatives will directly benefit incumbent banks. The introduction of a climate stress test will help banks reposition their credit portfolios in anticipation of the transition to a less carbon-intensive economy and thus avoid the credit risk in so-called stranded assets. The Bank of England will also explore ways of using machine learning and artificial intelligence to reduce the need for regulated financial firms to supply it with large amounts of data and to automate part of its own analytical work. These efforts should reduce regulatory costs for banks. And, a new policy on the use by banks of cloud technology and the automation of more post-trade processes will help firms adopt a cheaper and more robust infrastructure.
However, these benefits for banks are likely to be outweighed by the effect of proposals to further open up financial services provision in the UK and reduce barriers to entry.
In the payments system, the Bank of England notes that while payments via card systems are convenient for customers, these processes entail friction and inertia that result in costs for the real economy. For example, fees can consume between 0.5% and 2% per transaction, while the eventual transfer of funds between buyer and seller can take several days to complete (with fees and delays being typically greater for international transactions). In response, the UK government announced a review of payments systems, which will likely lead to further initiatives to further boost the ability of providers of newer and cheaper forms of direct payment to access the wider market.
For its part, the Bank of England will continue to open up its real time gross settlement payment system to non-bank payment service providers. The central bank will also consult on whether to allow more firms beyond a small group of systemically important banks to access its balance sheet. Such moves, while apparently cautious at this stage, will intensify competition and lead to further margin pressure on incumbent UK banks. In addition, the Bank of England will explore ways to support new digital currencies such as that announced by Facebook, which are also likely to disintermediate established banks.
Meanwhile, the central bank will also promote greater competition in SME financing. Currently, the vast majority of SME lending in the UK is conducted through the largest four banking groups, and new entrants face significant barriers to entry, typically lacking the customer account data which helps banks make their credit decisions. The Bank of England suggests further promoting the existing principles of “open banking,” which allows customers to take control of their data and share them securely with alternative providers, helping SMEs create a “portable credit file.” Doing so would aim to reduce barriers to entry and stimulate competition, thus adding to margin pressure on banks.
Since the open banking initiative began in early 2018, there has been little effect on market shares in retail banking in the UK. But over time, the above measures mean that incumbent banks would likely experience margin declines in some of their traditionally more profitable activities of commercial lending.
Facebook released their while paper , and it poses a threat to current payment systems. The 29-page paper describes a protocol designed to evolve as it powers a new global currency.
“The Libra Blockchain is a decentralized, programmable database designed to support a low-volatility cryptocurrency that will have the ability to serve as an efficient medium of exchange for billions of people around the world.”
As Libra is a stablecoin, it will have less volatility than a crypto like Bitcoin as it’s tied to the value of real-world currencies. It’s potential is huge.
All over the world, people with less money pay more for financial services. Hard-earned income is eroded by fees, from remittances and wire costs to overdraft and ATM charges. Payday loans can charge annualized interest rates of 400 percent or more, and finance charges can be as high as $30 just to borrow $100.4 When people are asked why they remain on the fringe of the existing financial system, those who remain “unbanked” point to not having sufficient funds, high and unpredictable fees, banks being too far away, and lacking the necessary documentation.
Behind it, is the Libra Association, which is an independent, not-for-profit membership organization based in Geneva, Switzerland. “Members of the Libra Association will consist of geographically distributed and diverse businesses, nonprofit and multilateral organizations, and academic institutions.”
Founding members include:
Payments: Mastercard, PayPal, PayU (Naspers’ fintech arm), Stripe, Visa
Technology
and marketplaces: Booking Holdings, eBay, Facebook/Calibra, Farfetch,
Lyft, MercadoPago, Spotify AB, Uber Technologies, Inc.
Nonprofit
and multilateral organizations, and academic institutions: Creative
Destruction Lab, Kiva, Mercy Corps, Women’s World Banking
The reaction from the fintech industry has been positive, though others are concerned about privacy, and risk from Facebook’s existing reach, and are calling for an inquiry into the proposal before it continues. Which ever way you look at it – this is big news.
The fintech industry has expressed excitement over the announcement by Facebook that it was set to introduce a new cryptocurrency to market with the help of some of the biggest names in tech, via InvestorDaily.
The
cryptocurrency, dubbed Libra, has been announced by a Facebook white
paper stating their mission to empower billions worldwide to enter the
financial market.
“The mission for Libra is a simple global
currency and financial infrastructure that empowers billions of people,”
said the white paper.
The move has been met with excitement by
industry players, and general manager of FinTech Australia Rebecca
Schot-Guppy said such a rollout would open up new markets and promote
fintech innovation.
“Another exciting prospect out of this is
that Facebook’s reach may also help finally educate the public on the
power of blockchain and cryptocurrency. Calibra [digital wallet for
Libra] could take these technologies mainstream and put them at the
fingertips of every Australian,” she said.
Co-founder
and co-chief executive of Assembly Payments Simon Lee said it seemed
like Facebook’s attempting to copy what WeChat and Alipay had done in
China.
“We see Calibra as Facebook’s attempt to roll out what is
happening in China to the rest of the world. They’ve seen the
opportunity and have the scale to execute on it,” he said.
The
currency will be built on the Libra blockchain and backed by a reserve
of assets designed to give it intrinsic value, but perhaps the biggest
nod to consumers is that it will be governed by an independent
association.
Facebook has been plagued with user privacy
controversies, which would lead many consumers to be sceptical to
integrate the social media platform with their financial lives.
However,
the Libra Association is their attempt to placate those voices by
establishing it as a governing entity that is made up of the likes of
Visa, Mastercard, Uber, eBay, Spotify and Vodafone.
The
association, according to the white paper, will facilitate the operation
of the blockchain and manage the Libra reserve, making them the only
party able to mint and burn coins.
The association notes in the
white paper that it is important to move towards increasing
decentralisation to ensure that there remains a low barrier to entry for
the network.
The chief executive of neobank Maslow, Kane
Jackson, said the association’s concept showed that Facebook was aware
of what was required in order for the coin to thrive.
“Facebook
seems to understand that widespread adoption of finance-based products
will not be achieved without the decentralisation of their governance
and a community-inclusive approach to managing them,” he said.
Facebook
has also launched a subsidiary company called Calibra that will handle
its crypto dealings in an effort to separate user privacies, meaning
Libra payments will not intermingle with Facebook data.
Despite
Calibra operating as its own app, the wallet will integrate directly
into WhatsApp and Facebook Messenger to utilise the vast network of
Facebook to promote cryptocurrency.
It is this network promotion
that excites Jasper Lawler, head of research at London Capital Group,
who said the network would open other cryptocurrencies to billions.
“Libra
will breed familiarity of cryptos to a much wider audience. Two billion
people will now be much more open to Bitcoin and other altcoins,” he
said.
As Libra is a stablecoin, it will have less volatility than
a crypto like Bitcoin as it’s tied to the value of real-world
currencies, Mr Lawler said.
“The different properties of a
stablecoin compliment rather than compete with cryptocurrencies like
Bitcoin, Ethereum and Ripple. Being pegged to regular currencies make
stablecoins less volatile and more suited to payment processing,” he
said.
The announcement saw an overnight rally for Facebook, but
the community will have to wait to see how the rollout of the coin goes
as no launch date has been set
