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Libra Will Never Roll Out in the US First, to Seek Differential Competition with Existing Stablecoins

PANONY & PANews invited Henry Liu, YGC Management Partner and former Growth Strategy at Facebook, and Ryan Rodenbaug, Head of Asia Pacific of Trust Token, to share their opinions on Facebook Libra.

Henry:I’m just as excited / confused / as you are about the Libra project and look forward to this discussion.

Q: Facebook launches libra’ takes the hot topic so much recently. I would like to lead the topic starting from “Why does Facebook issue Libra, and what is the motivation?” Do you mind sharing your opinion first?

Ryan: To use their own language, it’s for helping the unbanked and to build out financial infrastructure for people without access to the traditional payment rails. It’s a similar mission/vision to many other stablecoins that currently exist.

Henry: Facebook as a for profit company would never invest so much resources and take so much risk to do charity work. Everything they do today and everything they’ve done in the past they’ve done it for their business. Which is 98% advertising. This will allow them to “upsell” their users / audience by becoming a marketplace as opposed to a marketing platform. And tokens is a way to distribute the liability to everyone else who’s a node. If they hold full control over the transactions, if someone launders money or provide resource to criminals, they are fully liable.

Q: With the “open, transparent” advantages of blockchain technology, can Libra break Facebook’s “data monopoly image” in people’s minds? Actually our personal detail information already fully knew by Facebook ,i just wondering that can Libra do user privacy protection well?

Henry: It allows them to rely less on taking advantage on user information for advertising purposes as they gain a new revenue stream and perhaps give some of that privacy power back, but they still have your data.

Ryan:Regarding changing their imagine — Ultimately, I think ‘no’. At least in the eyes of regulators, it’s clear that for the time being ‘data monopolist’ is burned onto Facebook’s reputation.

Speculation: They’ll also now have additional insights in your transaction habits off of Facebook if you were to use Libra on one of their partner websites or at a retail location, but this goes for all of the partners in the association, not just Facebook. I am not sure whether they explicitly talk in the whitepaper about how transaction data will be used.

Henry: They have that today :)

They buy credit card information from merchants, link that to FB identity and especially if you’ve used their payment system in the US, they can map you perfectly.

Ryan: This is certainly a new level of depth.

Henry : Regarding regulation .The regulators have to look at pros and cons.

Cons is they FB might take over their broken system and introduce new problems.

Pros is that FB will bring lots of revenue to merchants locally. Lots of economic activity on e-commerce and p2p.

阿文: @Ryan, I think regulation still the biggest issue that different projects are trying to tackle down, as @Henry says, there are pros and cons. We all know how blockchain and crypto from an idea phase could benefit the world, but I believe Facebook would have more control over the cons than the most the existing players. But certainly happy to see how Facebook can tackle down the problems first. Certainly happy to see TrustToken is setting strategies around regulation compliance, use cases too.

Q: Libra will target a series of fiat and will be stable, will it threaten the status of the mainstream stablecoin in the market such as TrueUSD?

Ryan: It is important to highlight that one Libra will not always be able to convert into the same amount of a given local currency (i.e., Libra is not a “peg” to a single currency). Rather, as the value of the underlying assets moves, the value of one Libra in any local currency may fluctuate. However, the reserve assets are being chosen to minimize volatility, so holders of Libra can trust the currency’s ability to preserve value over time. So it’s similar to e.g., TUSD and also different.

One reporter at Bloomberg summed it up well: “For another thing, if Libra gains widespread acceptance, its lack of one-to-one correspondence will give it a tendency to displace national currencies. If you mostly spend dollars, and Libra is always going up and down against the dollar, that will be annoying and you won’t want as many Libras. But if you mostly spend Libras — if Facebook is successful at making this the main currency of the internet — then that dynamic will reverse. If the dollar is always going up and down against the Libra, that will be annoying and you’ll want more Libras. The dollar will start to seem unstable and useless. If you buy most things online, and if everything online is priced in Libras, then you’ll end up living your life denominated in Libras, and only converting your Libras into dollars on your occasional touristic visits to the physical world.

Henry: Correct. Between Facebook, Messenger, IG (Instagram)and WhatsApp, they cover about 90+% of population in the US and about 3–4 billion people.

Ryan: But again — this brings up the question of who is the target market. Since it’s a basket of currencies, people in the US, would probably still prefer to use USD over a basket, but people in a developing nation with an unstable currency would still find Libra more stable, but in theory a single fiat-backed (e.g., TUSD, TEUR) would have clearer purchasing power over time, though you do put more of your “eggs in one basket”.

Henry: I think central banks around the world doesn’t realize or understand the scale of FB. Libra could very well be used more than USD with combined international users.

Q: How does Libra affect mobile payments (such as China’s Alipay and WeChat payments) and traditional financial institutions?

Henry : In China, it doesn’t affect anything. Everywhere else in the world, especially central / South America and Europe, Livea will introduce “Alipay” or “wechat pay” to those countries in the form of Libra tokens.

Ryan: Yep. It’s no secret that Mark Zuckerberg has has WeChat envy for a while.

Q: Alyssa: As we spoke of local currency and bringing revenues locally, Thoughts on where it might roll out followed by the US market? “

Ryan: South east asia seems like an OK target. I’ve met several companies there who have had interactions with their team there, but as Henry points out… similar issues in that internet can still be difficult in many parts. Though mobile payments are growing.

Henry: They will never roll this out in the US first knowing what I know.

That proposes too much risk. They will likely launch wherever the regulators welcome them. Traditionally they’ve tested new products in Australia New Zealand and Southeast Asia.

This time might be India first since they mentioned it in their conference.

Africa also has the most needs requires much infrastructure. Internet.org is there to give them internet still. Without internet, there’s no Libra.

Q: I would like to ask a sensitive question, do you think it’s a bad timing for Facebook to announce Libra by US and Chinese governments having issues?

Henry:I don’t think there’s ever a good time to launch Libra. It’s going to disrupt banks, regulations, trade and a lot of things. They know that too that’s why they announced it 12 months before launch. Earlier the better to warm everyone up to the idea and get through political hurdle.

Q: KOLs in Twitter suspected its privacy protection ineffective, what do you think?

Ryan: Given Facebook’s history on privacy protection, I think it’s safe to assume this. HOWEVER, given the scrutiny that they receive from regulators, I think they are incentivized to focus on privacy to avoid additional regulation issues.

Q: Here’s question around cost of running a validator node.According to The Block, it will cost roughly $280,000 a year to run it, while another source of said it will just cost roughly $40,000 yearly. Do you know which number is more precise and what kind of server is required ( I heard AWS’s m5.24xlarge is eligible)?

Ryan: Node price — not sure. Sorry.

Henry: Also the 100 initial node operators are all investing $10 mil and the requirement states you have to be worth over $1 B as a business so node running cost is negligible.That’s likely TBD. A lot of things are changing and they are iterating as it goes and they can because they haven’t launched.I’d speak directly to Libra team.

Q: What’s the most 3 popular words that people are mentioning when you discussing about Libra in US?

Henry : The 3 biggest topics I’ve seen are, regulation, governance / nodes, and potential impact.

Ryan: Regulation, privacy, trust.

Henry: I have a question for Ryan.Do you think Libra is expanding the stable coin market or taking over market share? Will Libra take folks away from using TUSD.

Ryan: Definitely still TBD. I think for all stablecoins now, the core use is trading on exchanges. But we are all also exploring new use cases in remittances, etc. Going head to head with Libra will probably not be ideal so I think it will be up to TUSD and other stablecoins to really carve out their niche and focus on 1 or 2 areas.

Henry: Agreed. Libra is a pure consumer play. They won’t function to compete against JPMcoin or exchange use cases.

Q: Then why it has to be blockchain? Alipay and wechat pay is doing all the process good without blockchain.

Henry: It doesn’t have to be blockchain.Blockchain helps them to have less liabilities, less regulatory scrutiny and faster scale.By involving partners as nodes, they give up control in exchange they scale up the network faster.They know network effect better than anyone else in the world.

It’s market domination firstAnd because they are FB, they can do this. No offense to TUSD, try to get PayPal, Uber or Lyft on board in less than 3 months. That would’ve never happened.

Q: Will Libra public chain become a threat to Ethereum ecosystem especially in DeFi realm.

Henry: Ethereum was never meant to be used as store of value. Don’t think it was ever the intention. Buying coffee from merchants with ETH shouldn’t be the goal for Ethereum developers in my opinion. However Ethereum can do a lot more than what Libra does as a stable coin we all know that. Avoid means of transactions and payments if I was a Ethereum developer.

Q: Do you think Twitter will do a new “Libra” ?and Google?

Henry : Twitter and Google are all very different businesses. Twitter is becoming more of a news channel. Google is an online directory . Facebook + IG has always been the largest discovery platform for new information and goods and services. Now twitter takes away information. FB & IG still has foods and services. They have to enter Amazon’s space.

Ryan: I don’t have strong opinions. I think it’s a bigger threat to protocols of which their sole purpose is payments e.g,. Ripple. But even in that case, Ripple is more enterprise focused.

Q: How do we see the marketplace overcome regulations to onboard legal users?

Ryan : That could be a challenge. If they are targeting the unbanked, many of these countries lack a uniform ID like drivers license of national ID or passport.

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