On June 18, 2019, Facebook announced the launch of its virtual currency, called Libra, which is slated for deployment in 2020.
Although the precise modalities are not fully known, we know the main outlines:
– The value of Libra will be based both on a basket of stable currencies such as the dollar or the euro and on a “Libra reserve” managed by the Libra Association which is an “approach similar to how were introduced other currencies in the past ”(Libra Association press release);
– The Libra Association, a non-profit organization based in Geneva, will have the role of managing Libra independently of Facebook;
– At present, around twenty companies are already partners, including Spotify, eBay, Booking, Visa, PayPal and Calibra, the largest bitcoin exchange in the world.
– These companies are members of the Libra Association, just like Calibra (an entity created by Facebook) and guarantee the association’s independence from Facebook.
Two weeks after Facebook’s announcement, Congress, in an open letter published on July 2, asked “Facebook and its partners to immediately suspend its Libra project” while it was time to study the potential risks of this currency that could “Lead to a whole new global financial system based in Switzerland and competing with US monetary policy and the dollar” (US Congress press release).
Indeed, the many Gray areas current events surrounding Libra do not reassure the US Congress concerned about the issues of “privacy, commerce, national security and monetary policy not only for the more than two billion Facebook users around the world, but also for investors, consumers and more generally for the entire world economy ”. Add to that the money laundering and counterterrorism risks posed by Libra.
In addition, the Cambridge Analytica affair that shook the 2016 US presidential elections does not work in Facebook’s favor in a current climate of mistrust and caution vis-à-vis data protection.
Finally, Libra could call into question the extraterritoriality of American law.
In fact, in 1977, the United States passed the “Foreign Corrupt Practices Act” (FCPA) on the corruption of foreign agents which aims to fight against the corruption of American companies and multinationals outside American territory; and notably through the OECD in 1997, it applies to all member countries of the organization (including Germany, France, the United Kingdom and Ireland).
Therefore, the United States has a formidable weapon in the fight against corruption, because even a case taking place outside the United States can be condemned, such as the use of the dollar or even a service. having a link with the United States (ie use of a Gmail box for exchanges, some servers of which are on American territory) which are subject to American jurisdiction.
Thus, since Libra constitutes a currency of exchange managed (supposedly) independently of Facebook by the Libra Association based in Geneva, it therefore becomes potentially possible for a foreign company to trade freely with a country without fear of possible fallout from States. -United.
Subject to any changes to Libra in the days and weeks to come, French banks may have great business, financial and development opportunities with Libra.
First, they could integrate Libra into new commercial offers in order to attract new customers more inclined to new technologies and looking for speed, comfort and simplicity.
Also, Libra as a virtual currency can be a means of competing with online payment services occupying an increasingly important market share. Indeed, by integrating the currency of Facebook, banks will allow their users to carry out transactions between them quickly, conveniently and without delay.
Finally, from a more global point of view, and provided that all global players use Libra, it can have a significant impact on the costs of companies with the end of interbank commissions or the end of transaction costs. in currencies linked to the exchange rate (ie French airlines purchasing their kerosene in a foreign currency).
The major challenges for banks are therefore both to target the best future opportunities and to forge the appropriate partnerships to best integrate Libra into their development, the upheaval of which can be severe.