- Money could eventually be enhanced in the future by applying technology
- Libra addresses many of the challenges that money is currently facing
At the moment everyone is talking about Libra and what Facebook has to offer to the crypto market and the financial world. However, Nik Milanovic, a fintech and financial inclusion enthusiast, considers that it is time to start thinking which is the role that money plays in the current world.
Will Money Eventually Evolve?
In a recent article released by TechCrunch, Mr. Milanovic explains how different industries have been evolving over time thanks to the evolution of technology. This is the case to communications with the email, bookstores with Amazon or taxis with Uber. However, he claims that money itself has remained unchanged over time.
He believes that money didn’t change because currencies are controlled and issued by states and it needs to be controlled by them. At the same time, money is also too critical to have a similar level of disruption as other industries and assets.
With the new Libra project released by Facebook, it is possible for people to understand what money should be and how it should work, even if Libra does not succeed and it is affected by regulations around the world.
One of the first things that Milanovic says is that money should be free to use. Financial institutions and other parties have to pay to have access to their money and ATMs charge high fees for withdrawals. Meanwhile, checks are also expensive to print and banks have large commissions for users that store their funds in security boxes or accounts. He keeps by saying that PayPal has high fees, foreign remittances incur fees and check-cashing also involves fees that users have to pay.
There are applications such as Venmo, Square Cash and WeChat Pay that want to let people transfer money and use it at no cost. Apple Pay and Google Pay are also making it easier by using the phone an instrument for in-person purchases and with no cos at all.
According to Aaron Klein at Brookings, slow payments can affect poor people. The time that it takes for a transfer to settle or for payroll to be deposited can mean the difference between paying a bill and incurring an overdraft fee. Thus, it can mean that these people would not have enough funds for weekend grocery shopping.
Moreover, electronic money can take just a few minutes and hours to be transferred, but the funds appear in a bank account in several days. The author explains that this is because the rails on which money is moved in the United States – and other countries- are more than 40 years old. There are some employers that allow workers to have their funds in real time to allow people to use their money as soon as they earn it.
He also claims that money must be integrated with improved digital identity systems that would allow for innovation to grow. The reality is that UI is currently not efficient in many cases because it requests users to provide a lot of information through different methods.
Through new mechanisms and innovation, it is possible for people to use biometric identifiers such as fingerprints or Face ID, which authorizes the use of money. There are other solutions that promise to provide a sell-owned ID profile.
Money should also be secure and stable in order for it to be used. Indeed, in countries with security problems, those individuals using digital payment systems would not be assaulted on the street or they would not be targeted by stealers. Meanwhile, individuals carrying cash are going to be severely affected by thieves.
There are different countries that are affected by high inflation rates. Venezuela, Zimbabwe, Argentina and Somalia are just some of them. This has affected people in these countries and now their citizens do not trust their currencies.
Caitlin Long, a recognized crypto supporter and the lawyer behind Wyoming’s blockchain regulation, explained:
“Central banks in developing countries are notorious for their lack of discipline in maintaining the value of their fiat currencies, which too often lose purchasing power.”
Libra will be backed by fiat currencies of different countries that could include the Euro, the British pound, the US dollar and the Japanese yen. In the future, however, Libra could gain an intrinsic value and eventually separate itself from the fiat currencies behind. This is something similar to what happened to the US dollar when it left the gold standard in the past.
Furthermore, another important thing that Milanovic explains is that money should be interoperable. He claims that it should be easy to buy something in a country with different currencies by using the same payment protocol. In addition to it, transferring between currencies should also be instantaneous, free and without necessarily visiting a platform or a bank.
Finally, one of the things that money should have is guardrails. Digital money can be traced and programmed, which can create safety guardrails and prevent terrorist financing, money laundering and black-market purchases. In this case, Libra is expected to be controlling everyone using the virtual currency.
Facebook is known for gathering information from its users and use this data to monetize its platform by selling ad places to firms. However, as the author of the article explained, there are many different reasons to be skeptical of these money guardrails since repressive regimes could use them to control citizens.
Thus, money could be improved over time with the implementation of technology. There are many issues to face and to deal with, many challenges to solve, but the trend is clear, and Facebook’s Libra is just one of the first steps into this direction.
Author: Carl T