The recent introduction of Libra by Facebook has caused tremors in both the physical and virtual financial spheres, as the much-touted "new global currency" presents itself as a game-changer for mainstreaming the digital currency movement and liberating the unbanked.
An announcement by the world's largest social network has fed hopes of a common, trusted digital money as the next electrifying stage of payment in the fourth industrial revolution.
On the other hand, traditional institutions controlling payment channels, such as commercial and central banks, are grinding their teeth over fears of a paradigm shift in the global financial system, with transfer fees and remittances seen as the initial casualties.
But what makes Libra different from, say, bitcoin? First and foremost, Libra is designed to be a "stablecoin", meaning its price fluctuation will be minimised by the backing of a reserve of assets designed to give it intrinsic value.
Real-world currency used to buy Libra will go into a reserve backing the digital money, the value of which will mirror stable currencies such as the US dollar and the euro, according to Libra's creators.
According to a white paper, Libra is built on a "secure, scalable and reliable blockchain" technology. An open-source system lets developers, businesses and Joe Public hold and transfer Libra for everyday use.
Contrary to concerns over Facebook solely supervising Libra, the cryptocurrency is governed by the independent, non-profit Libra Association. Headquartered in Geneva, the association currently consists of 28 members, including Mastercard, eBay, PayPal, Visa, Uber, Spotify and Vodafone, plus Facebook subsidiary Calibra.
The association hopes to grow to 100 members with an equal vote in the future.
The Libra Association will be the only entity able to "mint or burn" the digital currency, maintaining supply in tune with demand and assets in reserve.
"Libra is interesting because it has the full potential to gain momentum for mass adoption, thanks to the complete ecosystem supported by Visa and Mastercard," said Sathapon Patanakuha, chief executive of SmartContract Blockchain Lab & Block MD.
LEVERAGED ECOSYSTEM
As an advocate of cashless payment based on convenience and tracking ability, a 32-year-old marketer named Lookwaa said Libra has the potential to take digital payment to the next level, though scepticism remains over whether it can fully disrupt the mobile payment channel.
For BB, a 33-year-old manager at Unilever Thailand, money transfer fees are poised to decline, but security is still a concern because there have been cases of hacking on Facebook.
In any case, "leverage" seems to be the key word in the potential success of Libra, with Facebook taking the initiative to develop a digital wallet called Calibra through the same-named subsidiary.
Calibra is being built into Facebook's Messenger and WhatsApp, with the goal of letting users send Libra as easily as they send a text message.
The mobile payment channel could be disrupted if Libra succeeds. (Photo by Varuth Hirunyatheb)
"With Libra, Facebook has a huge opportunity to create a worldwide payment ecosystem by leveraging their 2-3 billion users, partners and many existing use cases on its platforms," said Ascend Money co-president Monsinee Nakapanant.
As a testament to their commitment, many big names in the financial and tech industries have already signed up as partners to cement confidence in the new payment network.
"If this payment ecosystem kicks off, Libra has the potential to become a new universal currency used to make payments, transfers and even investments," Ms Monsinee said.
Libra can be used in Facebook Marketplace for commerce, for peer-to-peer transfers, or through partners such as Lyft and Spotify for payment of services.
Being based on the blockchain network, Libra can be processed and transferred more quickly than under existing payment networks by banks or even by Mastercard and Visa, which means it can scale, Ms Monsinee said.
For e-wallet in Thailand, blockchain technology will play a part as the underlying infrastructure for future payments and digital services.
"In the longer term, Libra will most likely try to launch in as many countries as it can, including Thailand, therefore we need to ask ourselves which use cases are going to benefit," Ms Monsinee said. "And from there, opportunities for the digital ecosystem can be identified."
NEW FINANCIAL ERA
"The financial system over the past 20 years has been constructed on physical layers and a cash-oriented system, but new types of financial institutions have appeared on digital layers," said Jirayut Srupsrisopa, co-founder and chief executive of Bitkub Capital Group Holdings Co Ltd.
The gradual demise of newspapers and magazines is concrete evidence of how the world has ridden the digital wave. Ultimately, the financial industry cannot escape such dramatic change.
"Libra and mobile phones will accelerate technology adoption at a faster pace, as today's mobile phone population is larger than the population having bank accounts," Mr Jirayut said. "It is a very exciting era."
The global e-wallet market continued to grow in 2018, with transaction volume estimated to total 41.8 billion, equivalent to 8.6% of global non-cash transactions, according to World Payments Report 2018.
Unsurprisingly, tech giants such as Google, Apple, Alibaba, Tencent, Facebook and Amazon captured a significant share of this market.
The conventional services of banks, such as international money transfers, will become obsolete as peer-to-peer money transfers become the norm, Mr Jirayut said.
Thakorn Piyapan, head of digital banking and innovation at Bank of Ayudhya, agreed that Libra could threaten the banking industry's traditional services.
"As a local bank, it is not easy to handle a [financial] tsunami," Mr Thakorn said. "We will need collaboration of the country's overall banking sector, as well as the regional banking system."
The magnitude of the impact will hinge on central bank regulations, he said.
"Trust and security are important factors that make consumers confident in banking transactions," Mr Thakorn said. "These are the key strengths of banking services."
Banks still have the advantage of familiarity with consumer behaviour and are equipped with the expertise and business connections necessary to build on their existing digital layers, Mr Jirayut said.
For central banks, their grip on the traditional financial sphere will weaken as they undergo digital transformation to survive.
Central banks have two options, Mr Jirayut said. "First, they can join the Libra Association with one voting right as a member. Second, they can develop their own digital currencies for which demand and supply are based on the physical foreign exchange rate."
REGULATORY BARRIERS
Despite rosy prospects, regulations could present a challenge to Libra adoption.
"This is because fundamental questions remain, like what is Libra classified as," Ms Monsinee said. "Is it cryptocurrency? Is it money? Is it a fund? And that classification will determine which licences Facebook would require to operate Libra and which regulatory body would govern it."
Some financial regulators, like Bank of England governor Mark Carney, are open-minded about Libra, while cautioning that mass adoption would be subject to "the highest standards of regulation". Maxine Waters, chairwoman of the US House's committee on financial services, has voiced an opposing view, saying cryptocurrencies pose national security, cybersecurity and trading risks.
Thailand's Securities and Exchange Commission has said that exchanges, brokers and dealers interested in Libra operations will need to seek permission under the royal decree on digital assets.
The notion of a global digital currency will eventually happen, but not in the near term, said Michael Araneta, associate vice-president of IDC Financial Insights.
"There needs to be involvement from stakeholders in the digital economy that are non-US-based in order for Libra to have a chance to be a truly global digital currency," Mr Araneta said.
Many regulators will be defensive with regard to the project and will most likely block it by citing anti-money-laundering issues, he said, but in reality it could be the loss of monetary policy power that stands out as the most significant issue.
Data privacy is another pain point for Libra to overcome. With billions of users around the globe, Facebook could contemplate providing digital loan services that are integrated with Libra in the future, with loan approvals based on user data and credit scoring.
"Our financial information will provide Facebook with the means of offering more [innovative] services," said StockRadars chief executive Teerachart Kortrakul. "Facebook could embark on real-time loan approvals because it has users' financial data on hand."