Libra’s aim at being a global currency for digital transactions may have encountered its “resistance zone” in two of the most important countries it tries to serve. 1.4 billion Chinese and a similar amount of Indian citizens won’t be able to access it.
The initial hype of launching Libra as the solution to the problems of the unbanked seems to be a too early call, or better, just a dream too far away yet. Facebook will face problems not only in The USA and Europe but also in many other countries. But let’s here examine two of the countries with more than 2 billion potential users to Libra.
Currently, Facebook is banned in China. Also, all cryptocurrencies were completely banned in 2018 when the People’s Bank of China said it would block access to all domestic and foreign cryptocurrency exchanges. China had already banned Bitcoin exchanges back in 2017. Libra’s officers should need to convince China’s financial authorities that Libra is not like any other cryptocurrency. Also, how will they get around China’s blocking Facebook?
But there is another issue there for the development of Libra in China. They already have two successful and global payment methods: Alipay and WeChat Pay. Alipay has been in circulation since 2004 and is the main method for mobile payments. Wechat Pay, a subsidiary of Tencent Holdings Ltd, was launched in 2013, and now it has more 800 million users, is the main competitor to Alipay, an Alibaba subsidiary. Additionally, Wechat Pay allows its users the possibility to get loans up to 200,000 yuans in minutes. These two platforms combined attend more than 1.3 billion citizens in China.
Both platforms are eying Australia for the expansion of their financial services according to financial sources. The National Australia Bank (NAB) and the Commonwealth Bank allow businesses to accept payments from Alipay users.
India seems to be forbidden to Libra as well. According to an article by The Economic Times, Facebook may abort Libra Launch in India. The article mentions one person “directly to the know” saying that current regulations wouldn’t permit the use of a banking network for blockchain currency transactions in India. Calibra won’t be operating in countries where “cryptocurrencies are banned, or Facebook is restricted from operating in” (source: ET). Another person told this journal that Facebook have not filed any application with the Reserve Bank of India for Libra.
Although not wholly banned, back in April 2018, the RBI has released a warning note giving three months to regulated entities to stop dealing with cryptocurrencies due to the volatility risk associated with them. This regulatory ban has been contested by companies in India’s Supreme Court, and a hearing will take place on July 23.
According to a legal technology-focused expert interviewed, regulations in India does not distinguish between digital assets operating in a network or isolated, and fiat currencies. If Facebook’s Libra were to operate inside a network the RBI would be less concerned since this crypto-coin wouldn’t interact with the external markets. But if Libra was to operate in the open, which is the original intention of its creators, it was the kind of issue the RBI would be concerned of. Also, the argument that this is a stablecoin wouldn’t convince the regulator on concerns of money laundering and fraud.
According to the same article, another expert, pointed out that, under India’s IT Act section 79, Facebook must ensure its network’s users won’t engage in illegal activities, like dealing with cryptocurrencies in India.
Facebook is attempting to build a payment business in Inda with Whatsapp using the unified payments interface (UPI), but this network, with more than 400 million users in India, hasn’t received the approval to operate yet.