Open any news site and there it is, Libra. Besides happy Facebook shareholders, I’m seeing anxiety and uncertainty coming from both small and large organizations.
I spent some time looking into the construction and economics surrounding Libra and didn’t have to dig very deep as there are plenty of studies and research all over the web. Some notable ones include the following:
- Binance — First Look: Libra
- Life hacker — Facebook Libra: What is it, and do you need it?
- Chris McCann — Why Libra makes me even more bullish about Bitcoin
Libra is an independent, non-profit organization and many of their members are sizable, public companies that could potentially threaten retail and central banks. However, it appears that association members also need to work closely with banks. Limiting participants instead of decentralizing to make “unstoppable” features will come back to bite them.
Why do people care about Libra and why should you care?
There are different perspectives.
Are you in the blockchain business? Then you probably have mixed feelings. Depending on which blockchain protocol you are working on, some of you might worry that the Libra blockchain will take over a significant portion of the demand and market share. Given their massive user base (2.38B MAU Q4–2018 *Source) they can definitely grow faster than any other project. Why is it worrying? The reason is because many blockchain projects issue utility tokens and they serve a function: Proof of Work (PoW), Proof of Authority (PoA), Proof of Stake (PoS) or proof of…whatever. To incentivize token holders and network participants, you need sufficient usage, otherwise you won’t be able to create the self-sustaining network effects and the project can naturally become obsolete.
Whether you are a large, established company or a startup, you will face the same challenges when conducting business in the blockchain sector. My assumption is that Libra will find it difficult to shift to a permissionless network given their public status, and of course, be limited by the same regulatory hurdles we all have yet to cross. Since the launch of the Libra Association, Facebook has received an onslaught of questions concerning consumer protection and political opposition.
Speaking of regulations, as stated in their Guidance for a Risk-Based Approach (RBA) this month, the Financial Action Task Force (FATF) indicated the adoption of an Interpretive Note to Recommendation 15, which is meant to clarify how the FATF requirements apply to virtual assets (VAs) and virtual asset service providers (VASPs). The FAFT also adopted the guidance on the application of the RBA to VAs and VASPs.
The document covers most jurisdictions, but specifically mentioned the following countries for VASPs AML operations: Italy, Norway, Sweden, Finland, Mexico, Japan and the US. The operations of each country will vary of course, according to their own country’s regulation.
Overall, however, this will affect current operations of companies in this industry. While most exchanges (VASPs) have implemented a light-weight version of AML/KYC, FATF’s implementation of the VASPs regulation may cause some exchanges to lose a significant amount of users.
After reviewing the Libra whitepaper, I am still convinced that focusing on decentralization economics is key when it comes to making financial services accessible and fair. Libra is a natural threat and healthy competition. With that, I find the whole landscape to be very healthy, and yet the industry is similar to this chaotic entanglement of cables. Ultimately, it’ll be much less chaotic after the industry, processes and infrastructure become more developed.
What does Libra mean for consumers? Let me just focus on the regional perspective. The population in the Southeast Asian region has higher access to the Internet and social media than to financial services (the unbanked make up 73%, or around 438 million).
As we work towards our goal of financial inclusion, the emergence of Libra does have the potential to close this gap. However, a different strategy is required to tap into Southeast Asia — one that focuses on hyper localization and responds to consumer behavior within each country.
What does it mean for Omise Group?
As early blockchain industry adopters, we’ve seen a lot of ups and downs ever since we started back in 2014. We are really glad to see movements from large internet companies that spark public curiosity, as Chris McCann mentioned in his blog.
“One of the largest internet companies in the world is launching their own cryptocurrency and their own blockchain is a huge validation point for everyone.” — Chris McCann
Libra may be the first, but it won’t be the last. This may spur further developments and I am looking forward to seeing them as new entrants to the blockchain space are welcome. With the Libra Association, I anticipate an improvement in UX and mass market education on mobile-based value transfer and possibly even on “crypto”. For Omise Group, our mission is to provide “Payment for Everyone” and we favor open, permissionless networks over closed, paid membership models.
We as Omise Group are working on making payment available for everyone through both the traditional payment processing business and the new permissionless, decentralized infrastructure.
We’re seeing demands within the industry and we’ve developed a number of PoCs. It may seem like rocket science in the beginning, with many teams working to detangle the various strands and cables within our industry. But as the space matures, the time will come where we’re able to make sense of it all. Until then, we’re going to keep increasing our growth rate in the traditional processing business with Omise Payment. As for OmiseGO, they will continue to build the infrastructure and GO.Exchange will kick start their business operations to respond to the retail market.
On the regulation front and since the start, Omise Group has been working closely with regulators to comply with licensing and security standards for our businesses. Over the next 12 months, we will see with more clarity the compliance and regulatory measures we will need to take in each jurisdiction.
We’re examining a large amount of transaction data to get a better understanding of user needs and overall market trends. With further insight on specific segments, I am confident that the CEOs and the teams of each entity will be ready to support the demands. And of course, we will continue to build the most sophisticated and relevant products that people are willing to use and products that offer all users benefits fairly.
P.S. I really love this kind of developer community. Well done :) Bitcoin core merged?!