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Home » Daily Briefing » Daily briefing - 26 June 2019

Daily briefing - 26 June 2019

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Indonesia, the decentralised country

It's hardly a surprise that US congresswoman Maxine Waters is calling for a ban on Libra, stating that nothing must be allowed to challenge the dollar. Indeed. But those days of dollar domination are numbered. Richard Nixon's Treasury Secretary John Connally unilaterally took the dollar gold standard in 1971. Later that year, Connally famously told a group of European reporters — in reference to the export of American inflation via the dollar — that "it's our currency but your problem". Yesterday the Basel-based Financial Stability Board (FSB) managed to stutter something similar at Libra, Facebook's new finance offering. The FT reports a senior FSB official saying "If we're to have something like Libra, if it were to become a widespread retail payment mechanism, we would obviously be looking at that very closely." Wow, Facebook will be quaking in its boots. Broadly, however, regulators are welcoming the chance to engage with Libra, especially in Switzerland. (Libra's HQ is a short train ride away from the FSB headquarters in Basel). Thomas Moser, an alternate member of the Swiss National Bank's governing board, told a Crypto Valley Conference that Libra had clearly indicated that they are willing to play according to the rules, and had been contacting regulators. "I think it's an interesting development and I'm pretty relaxed about it," said Moser, as other central bankers around the world entered various stages of existential anxiety, knowing that the Swiss are only "generally pretty relaxed" about things like securely parking vast amounts of global savings in Alpine vaults when they've already thought the whole thing through.

As we wrote last year, Switzerland has been busy upgrading its former military bunkers into offline cryptocurrency storage units. "The Bank for International Settlements, an umbrella group for central banks, said on Sunday that greater political coordination was needed to deal with the entry into finance of major tech firms like Facebook," reports Reuters. It will not have escaped the attention of the BIS that it remains the daddy of banks, the most hated institutions in the world (maybe even more than Facebook). What a fight this is shaping up to be, and there's precedent here. When Rupert Murdoch scooped up Star TV in the 1990s, who was able to stop him from beaming satellite signals into countries across Asia? Who is going to stop Facebook's high altitude balloons from beaming the internet across much of Africa? (And by the way, Facebook operates on the internet.)

Let's take a look for instance at one of Facebook's major markets: Indonesia. From our recent Credit Cards and Digital Finance reports on Indonesia, we know that ecommerce is absolutely thriving. "The recent entry of Alipay, WeChat into Indonesia has enthused the market with Grab Pay and Go-Jek responding with their own local innovations. With 250 million customers, Indonesia is the largest ASEAN market for the Chinese giants. However, even the mobile wallet and ecommerce giants have found the Indonesian regulators to be a handful." India is no longer the main arena for the US to meet the Chinese challengers. Libra has published its white paper in Bahasa, an Indonesian language. Why? Among other reasons, Indonesia has the fourth-highest number of Facebook users in the world. "Since nearly 10 percent of Indonesian respondents said they also own some cryptocurrency, double American percentage, Facebook couldn't have dreamed up a better market for Libra," suggests Coindesk. "QCP Capital co-founder Joshua Ho, a trader who works closely with Indonesian exchange Tokocrypto, told CoinDesk Facebook's Libra ecosystem could be a 'gamechanger' in Indonesia. 'People are already very aligned with mobile payments,' Ho said. 'It is geographically decentralized. Creating banking access is a huge challenge'."

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