The news about Libra has been out for about a week. The think pieces have come in waves, as have the reactions from analysts, cryptocurrency enthusiasts and regulators — and the world waits to see exactly what Facebook and its cadre of payments and commerce players design.
For Mastercard, one of the founding members of the Libra project, what is happening now is both extremely new and somewhat familiar.
“As you know, we’ve been looking at blockchain for quite a while, understanding the technology standards, doing pilots with banks and filing a number of patents. We absolutely think stablecoins will play a role in our future, that is [what] we have invested in over the years,” Executive Vice President of Digital Solutions at Mastercard Jorn Lambert told Karen Webster in a recent conversation.
What Mastercard sees in Libra in its embryonic stages, he said, is a novel way of combining a cryptocurrency with a private governing body and structure, to create something stable and ubiquitous enough to be used for payments worldwide — at least, it could be. As has been a running theme in PYMNTS conversations with Libra’s founding members, Lambert reiterated that there is much ground to cover between today and the Libra rails launching, which support payments and commerce innovation.
There will be perceptual hurdles to clear, and regulators to convince. Not to mention, he noted, there are the big questions that will only be answerable once those charter decisions have been made: “What does this cryptocurrency do that a fiat currency cannot do? What problem will this really solve?”
The Twin Concerns: Bitcoin And Facebook
There are two difficulties that Libra, as an entire project, will have to clear that aren’t so much a matter of design as they are a matter of association. To the average consumer and regulator, the worlds of “cryptocurrency” and “Facebook” in the same sentence inspire more alarm than confidence.
Bitcoin, specifically, and cryptocurrency, in general, have attracted speculators, cybercriminals and all sorts of dubious connections large enough to scale that it makes most people nervous. That nervousness is not entirely misplaced, Lambert noted, because cryptocurrencies and blockchain technology are innovative and extremely new. As is typical of most new things, there aren’t existing regulations for these advances, but that isn’t a reason to hit pause on innovation. It’s a reason to work with regulators.
“We have to understand what they really want — consumer protection, avoiding fraud, avoiding terrorism financing, avoiding money launderers. Our task is to work with regulators to achieve a framework in which that can exist,” Lambert told Webster.
There is also a related, but separate, issue around the project associated with Facebook, as the social media giant has found itself in regulatory crosshairs over consumer data protection and privacy. It is not exactly the ideal moment to be pushing a payments venture from a timing perspective, Webster noted.
The association with Facebook at present makes sense, according to Lambert. It was the instigator of the idea, it wrote the white paper explaining it and it has been recruiting the team of rivals to run it. However, what is critical is the fact that Facebook is not running it. There will be a large distinction between the Libra rails and currency, and the social media network that is Facebook.
“Right now, you have that amalgamation of the two ideas that is not particularly helpful — and we will work hard to draw a distinction between the two things. We would not participate if we thought one firm was pulling more weight than the others, and breaking trust in the system,” he said.
As for what that system will look like? That, Lambert told Webster, is a work in process.
The Early Design Phase
What the world has seen, as of today, is just the earliest sketch of what will ultimately be an expansive effort — at least, if all goes as hopes, Lambert noted. The job over the next few months will involve drafting that charter, as well as codifying what it means to be a founding member, what being a node in the system will entail, and how the system will be able to build and scale globally.
Once everyone is comfortable with the final edition, those $10 million pledges will be paid out. The technology will then be put into place, tested and (hopefully) start deploying into market next year.
A lot can change, Lambert noted, and a lot may. Some founding members may drop out as duties become more clarified, or new entrants may step on board.
“It is truly a very first stab at this; a lot needs to be understood and worked through. But we have a coalition of players that want to work through this. What we have today is unproved, but we think it can really help in certain uses cases. The proof, though, will be in the pudding, and so we all need to work toward getting it out there,” he said.