2 Months Ago

Facebook reported, in its Q1 2019 press release, that it now has 2.38 billion monthly users across its various apps - Messenger, WhatsApp, Instagram and Facebook, with 2.4 billion people using one of these apps every day.

This is a rise of 8% over the last year in which Facebook had 1.56 billion logging on every day (Facebook itself is also an increase in the last year of 8%).
As the Chinese Crypto Czar pointed out, “The most a central bank could do to prevent Libra from entering a country would be to ask all of their payment institutions and commercial banks not to process any transactions which are related to Libra. Still, there are a few back channels through which users could circumvent the ban to purchase Libra, look at underground Bitcoin trading in China as an example of how it could work”.
Indeed, look at the success the Americans had when they introduced prohibition in 1920, as by 1925, in New York alone, there were over 100,000 illegal bars. Not only was there a huge loss in revenue from the tax on ‘booze’ not being levied and collected, but there were 1,500 federal agents who had to be paid and who was meant to enforce prohibition. Then, there was all the loss of life and social unrest from gangsters, such as Al Capone, who roamed the streets in the USA. In many ways, we have similarities now as, on a global basis, the fight against drugs is estimated to be costing over $100 billion p.a.
Michael Corleone in The Godfather Part II said, "keep your friends close, keep your enemies closer". Maybe rather than fight Libra, governments need to look, listen and learn.
Christian Legarde (former Managing Director of the International Monetary Fund) said in a speech in Singapore earlier this year, “A new wind is blowing, digitalization. In this new world, we meet anywhere, at any time. The town square is back—virtually, on our smartphones. We exchange information, services, even emojis, instantly, peer to peer, person to person. We float through a world of information, where data is the “new gold”—despite growing concerns over privacy and cyber-security. A world in which millennials are reinventing how our economy works, phone in hand”.
Governments want to own and control Digital Currencies, as opposed to these currencies being the property of a corporation such as Facebook. A consequence is that governments could face a loss of control over their citizens, as potentially there is competition with state-backed currencies like the US$. Digital Currencies offer governments the ability to track spending and collect taxes, as Digital Currencies offer a new set of tools to influence the money supply. This is now even more relevant, especially in the current era of low-interest rates.
As an aside, Facebook’s 1st Quarter results for 2019 display that the tax on earnings rose to 30% since Facebook has included the Federal Trade Commission investigation which it thought could result in a fine of  $3 to $5 billion.
Is this another way for Facebook to say that being fined is part of it doing business, and therefore is treated as a tax on its normal activities? (as either way the government gets the money). Given the state of politics in most...


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While Mark Carney, Governor of the Bank of England, has been positive about the idea of Facebook’s proposed Digital Currency Libra, the French Finance Minister, Bruno Le Maire, says “Non”

Le Maire said, we cannot authorise the development of Libra on European soil”. Le Maire was not so clear as to how such a ban would be enacted, although it does illustrate the fever of feelings that Facebook has proposed its Digital Currency has generated. However, the Finance Minister also hinted about setting up a public digital currency under the aegis of international financial institutions. The German reception has been equally hostile with the German finance minister saying, "it will ‘clearly reject’ tokens like Facebook’s forthcoming Libra token, with Berlin hoping to push the rest of the international community to follow suit”.

Facebook, itself, has promoted Libra as a way to offer the 1.7 billion “unbanked” people (adults either without bank accounts or those who use services outside the banking system, such as payday loans) access to banking services. Initially, it was rumoured, in 2018, that Facebook would launch Libra in India (where it has most users - see below)


Source: We are social, Hootsuite, Facebook

Authorities in India have made it clear they are not keen on a digital currency owned and controlled by one corporate entity, so it would appear that launching Libra in India using WhatsApp is unlikely to happen. However, as the chart above shows, Facebook has millions of users in Indonesia, the Philippines, Vietnam and Thailand. Given that these countries have a high % of their citizens who are young and tech-savvy, will Facebook focus on countries, such as these, first?

Facebook, as reported by the FT, is due to meet 26 central banks which are to quiz the ‘tech giant’ on its plans to launch Libra. The French, who currently holds the presidency for the G7, have managed to organise this meeting, and a report is being prepared for G7 members in October this year to look at digital currencies.

Libra has not been universally welcomed by many Western economies but if Facebook is serious about launching its digital currency to help the unbanked, then surely Facebook needs to focus on countries where the “banked” actually reside. Therefore, could Facebook create a different version of Libra that is pegged to a basket of countries’ currencies, such as Indonesia, the Philippines, Vietnam and Thailand (where Facebook already has a strong foothold). While it may mean that this new style of Asian Libra will not be treated as legal tender in the USA or Europe. In Germany, Facebook has 26.8 million users and in France, 28 million. As the chart above demonstrates, Indonesia, the Philippines and Vietnam singularly have more Facebook users than both the customers of France and Germany combined.

As an aside, Facebook has been testing with Instagram to remove the number of ‘likes’ people receive. The idea is to prevent users from comparing themselves against others and feeling disgruntled if their content doesn't achieve as many ‘likes’ as someone else. A possible replacement could be to reward its users with some kind of token instead, to encourage people to keep posting (as this helps Facebook’s advertising, and hence profitability).

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