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Five Countries Libra Cannot Help (and why it really matters)

WorldBank Global ID4D Dataset 2018
  • We know that 1.1 billion people worldwide don’t have proof of legal identity.¹
  • Of those, 50% are in Sub-Saharan Africa and 91% are low or lower middle income.
  • Still, the rates of ID-less in some developed nations can be surprising: Singapore-37%, Hong Kong-36%, Saudi Arabia-60%, Switzerland-19%, USA-12%, Canada & UK-11%.

What does this mean in the context of Libra? It means that it will be inaccessible to many people Facebook claims it will help. When people are unbanked due to being ID-less, they similarly cannot pass KYC and hold Libra’s token. Facebook has been very clear that they intend to require KYC and provide lawmakers of all sorts with transaction data.

I have been conducting interviews with citizens all over the world to further understand the real issues they face with sending money. Despite Facebook’s moving, colorful, well-produced (exploitative poverty porn) video, many people who look like the people in their video will be still be left behind.

Sorry Ope in Lagos, Nigeria — No ID? No Libra
Sorry Saul’s family business in Manilla, Phillipeans. Maybe you have an ID, but your staff doesn’t.
“Safe and accessible no matter who you are or where you’re from”

The truth:

Safe [unless you live in an economy with a reckless leader] and accessible [unless you are one of the 1.1bn people with no ID].

Don’t be fooled: Libra will very much be business as usual.

Let’s dig a little deeper into these five countries to understand the situation: Myanmar, Singapore, Argentina, Sudan, and Ethiopia.

Myanmar

A third of Myanmar’s population is unregistered. Myanmar holds the dubious prize for the “world’s longest ongoing civil war.” What looks like a single country from the outside is in fact a group of states, many of which want independence from the single nation-state we call Myanmar.

It is no wonder, then, why a third of the population is unregistered or why Myanmar receives over $1.4 billion annually in remittances.

Many of those remittances are informal, and that number may be under-reporting the true amount:

Despite the growth of formal money transfer mechanisms, substantial amounts of remittances in many countries continue to flow through informal (and sometimes underground) channels, outside the purview of government supervision and regulation.

Libra will not help Wong Lurn send money home.

Formal money transfer mechanisms require KYC, like Libra. These informal remittance services exist because the formal system doesn’t serve them. One Myanmar man I interviewed uses informal services and it has never failed him, but he pays a hefty 10% fee. Libra may compete with TransferWise for people who can already use TransferWise, but it is unable to help our interviewee.

A sizable community of migrant workers from Myanmar live in Singapore. As the Financial Times reports, most of them use informal remittance services:

A warren of tiny shops ply a service for the large community of Myanmar workers who stream in to transfer money home. The costs of using such services are not far below the fees big banks charge for money transfers, which average at more than 5 percent of the transfer amount.

They use these services due to lack of accessibility to banks and a mistrust in centralized systems. Facebook’s Libra is at a best a better bank, and it will still face the same accessibility issues. The chance that the sender and the receiver will both have ID but no bank account is low. This crafty, effective, and unregulated solution would be untouched by Libra.

Singapore

Despite being the economic hub of SE Asia, Singapore’s unregistered population is surprisingly high at 37%. This means that a third of Singapore’s population will be unable to use Libra. Imagine trying to do business with a currency that a third of the population cannot accept, many of whom may not be in a position to get a government ID.

In the unlikely event that Libra took off, this third of the population would be worse off. Consider that 17% of Singapore’s population are migrant workers, and likely make a disproportionate number of the ID-less. Already a high-risk community, and unable to receive payments, the adoption of Libra in Singapore would further marginalize this group.

Argentina

At a first glance of the numbers, Argentina seems like it would be a perfect candidate for Libra. Unlike the other countries profiled here, nearly the entire population has government-recognized IDs, and a 5-year inflation rate of 32% means that citizens would benefit from a stable currency.

The problem here is not the lack of IDs — It is the government itself. MakerDAO’s oracle wizard Mariano Conti is Argentine. He explains on the POV Crypto Podcast how in 2011, the Argentine government instituted a ban on buying US Dollars. For people like himself in the tech industry, they couldn’t receive their salaries properly:

If someone sent dollars [to you from abroad], the government would trade it into pesos at the “official rate,” which was 30–40% less than you could get outside the banks. So that was a surprise. You could get 15 pesos to the dollar, but officially the government would trade it at 9 pesos each dollar.

Imagine — A client pays your salary in USD and government “converts” your incoming payments at a 40% loss against the actual exchange rate! Like some sort of twisted convenience fee.

This has since been replaced by a tax levied on cross-border payments. I have collected interviews from Argentine freelancers who share the 10–20% haircut they take merely receiving payments from clients.

Where does Libra fall on this issue? Facebook promises regulators that they will help them do their job:

[…] with proper know-your-customer (KYC) practices, combined with the ability for law enforcement and regulators to conduct their own analysis of on-chain activity, [this] will be a big opportunity to increase the efficacy of financial crimes monitoring and enforcement.

Sudan

Sudanese currency has faced a 63.4% inflation rate by the end of 2018. Meanwhile, the government continues to intentionally devalue the Sudanese pound.

To no one’s surprise then, Sudan has been plagued with economic and political protests:

Tens of thousands of pro-democracy protesters filled the streets of Sudan’s major cities in a defiant rebuke of the generals whose violent crackdown earlier in the month had left scores of people dead.

In a dawn raid on June 3 [2019], troops shot protesters, raped women, burned tents and cast bodies into the Nile. Doctors’ organizations said 128 people were killed over several days. The government admitted there had been 61 deaths.

Soaring food prices, a shortage of bank notes and long lines for fuel have frustrated many Sudanese. The injection of Saudi and Emirati aid in April [2019] briefly bolstered Sudan’s flagging currency, but it has slumped again.

Again, although Facebook advertises its Libra project as a solution that reaches both the banked and unbanked, it is ultimately ineffective in countries with such high unregistered populations. Almost 40% of Sudan’s population is ID-less, and Facebook has implicitly agreed to cooperate with the Sudanese government, the very same that is to blame for the unrest.

Ethiopia

Like Sudan, Ethiopia also has a large unregistered population, at 65%. Adoption of Libra would be nearly impossible. Yet, according to Facebook’s touching video, Ethiopia would be on the top of the list. Facebook’s own video mentioned Nigeria, which tops Ethiopia with a 72% unregistered population!

As of 2018, Ethiopia is the second most populous country in all of Africa. It is also one of the worst at providing sustainable wages to its people. According to a new report:

Ethiopian factory workers are now, on average, the lowest paid in any major garment-producing company worldwide.

The government’s eagerness to attract foreign investment led it to promote the lowest base wage in any garment-producing country — now set at the equivalent of $26 a month.

More people have gone abroad to work, and subsequently total remittances received have expanded to $4 billion. This accounts for 5% of total GDP, and 78% of these remittances come through informal money transfer channels. Informal channels are now of higher importance in the fight against a repressive government thriving on foreign money transfers:

Ethiopian activists living abroad are launching another remittance embargo campaign…The campaign aims to support the struggle of Ethiopians against the ruling party by way of mobilizing Ethiopians abroad to avoid sending money to Ethiopia through formal money transfer channels. And the goal is to deny government foreign currency.

Even if Facebook ignored the government of Ethiopia, it could not ignore the US Government’s money transmission laws that require KYC. It is abundantly clear that the only people here who will benefit from Facebook’s project were those hired to appear in their video.

Thailand / Myanmar Border Refugee Community

A small aside for a community close to the author’s heart: 111,000 stateless refugees on the border of Thailand and Myanmar:

Almost half of the population of the camp is under 18. Most children were born in the camp. They don’t have birth certificates and are stateless, which jeopardizes their future.

If you have been following along, you understand why Libra is NOT “accessible no matter who you are or where you’re from.” It’s not for lack of smartphones, either.

I have opted not to show you a stock photo of refugees

Conclusion — Business As Usual

These five countries I profiled are just a handful that I could have chosen. Here are the top 15 countries for unregistered population:

% Population without ID

Not only does Facebook have the nerve to claim it will be helping the world’s poor, but they completely forget to acknowledge the true barriers to adoption.

Their video feels good. I like feeling good. The lie is simple. The truth is complex.

The truth is: a corporation’s privately funded and privately owned central bank, with a go-to-market strategy launched on top of the world’s largest social networking site, “decentralized” among some of the largest corporations in the world — Very much business as usual.

Tl;dr

Libra will do insultingly little to help the people covered in the stereotypes in the video they had the nerve to release.

If you’re curious what kind of solution has the actual technological and legal potential to make the changes facebook claims to, check out www.mosendo.com.

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