On June 18, Facebook announced that it is forming a new subsidiary by the name of Calibra, that will begin issuing its own digital currency starting in 2020. While this might look like just another blockchain currency at first glance, it comes with legitimacy, accessibility, financial backing, and centralised control that most lack. For businesses, it may represent an important opportunity.
In its announcement, Facebook pointed to developing countries as its target market, indicating that it intends to improve access to financing and banking services for businesses and individuals who currently lack access. This larger goal is one that should catch the attention of business owners in the developed world. By introducing a stable user-friendly currency, the potential for financing, and potentially free international transactions, Facebook promises to provide vast numbers of businesses and individuals direct access to the global marketplace.
Opening new markets to global business
To consumers and businesses in the developed world, Calibra doesn’t seem like anything particularly unique or groundbreaking. It’s simply another way to pay for things, just like any other blockchain currency, or electronic wallet. For the developing world, however, it promises to be a game changer.
Over 3 billion people in the world have no bank account at all. Many of these people do, however, have a smartphone. With a bank account, and the promise of access to credit, these individuals will have the ability to invest in themselves, their businesses, and consumer products. It would effectively represent a massive injection of capital to individuals and businesses in developing countries. The resulting increase in spending, business activity, and growth this might spur on in those countries could be nothing short of extraordinary.
The world has a lot of untapped business potential
According to Facebook’s research, over 70 per cent of businesses in the developing world have no access to financing of any kind. This creates a massive barrier that prevents these businesses from competing against those who do have access to financing, which reduces overall economic growth, and limits competition and innovation as a result.
Businesses in Australia, the EU, and the rest of the developed world need access to low-cost labour and foreign suppliers. Currently many businesses who could fill those needs have no way to interact with foreign clients. Managing international payments can be very difficult, expensive, or entirely impossible depending on transaction costs, or whether the supplier even has access to a bank account. By solving these problems, Facebook is making it possible for businesses to access labour and suppliers who they otherwise would neither be able to find or pay.
What makes Calibra uniquely useful
Many of the features offered by Calibra are already available through other means. For example, legitimate international digital bank accounts already exist, as do various blockchain currencies that aren’t tied to any physical currency. What hasn’t happened until Calibra is an independent blockchain currency regulated by its own central bank that is also user-friendly and accessible to anyone with minimal hassle.
Accessibility and legitimacy
Calibra will be integrated with Facebook and Whatsapp, allowing users to securely send money using apps that they already have on their phones. This means there is practically no barrier to entry, because users don’t need to know anything at all about blockchain technology, and don’t need to download any strange new apps. They also don’t need to engage in anything that feels illicit, which is a real concern with regard to blockchain currencies. Unlike Bitcoin—and other cryptocurrencies—Calibra is explicitly above-board, without any association to illegal black market trade and other dark web dealings.
The general user-friendliness Facebook promises should also make it far more attractive for people and businesses in the developed world, who may have less prior exposure to digital commerce of any kind.
Businesses everywhere have been slow to adopt blockchain currencies, and for good reason. Besides being mostly unnecessary for traditional commerce, Bitcoin has undergone numerous boom and bust cycles. This made it less reliable than traditional currencies. The Libra, Calibra’s currency, will be regulated, preventing sudden inflation or deflation from occurring. This makes it possible for businesses to budget and do business using the currency almost exclusively, which is likely to be important for businesses in developing economies.
Whether this potential is ultimately realised depends strongly on Calibra’s implementation of its new currency, how affected governments respond, and how businesses ultimately respond. Considering the competitive pressures businesses face to cut production costs and find new markets to grow into, the Libra could ultimately become an important step in integrating developing economies into the global economy.