Facebook’s Libra Association, the supposedly independent governing body for a new digital currency the social media giant, has received a much needed boost with the news quickly growing ecommerce platform software company Shopify is backing it.
Since it was announced early last year Facebook’s cryptocurrency project, Libra, has veered from being hailed as the breakthrough initiative that would mainstream digital currencies to the brink of seeming collapse. A hard line stance by financial regulators saw early supporters including Visa, Stripe and eBay beat a rapid retreat and raised suspicions Facebook had not really thought things through before going public with the plan.
Despite Facebook maintaining a bullish tone, it looked like Libra had withered on the vine. But the announcement that Shopify has joined the association backing the ‘stable coin’, whose value is planned to be backed by hard currency, suggests the initiative may yet come good. Shopify will contribute a minimum of $10 million to the hard currency reserve that will back Libra, as well as operating one of the blockchain ‘nodes’, that will process transactions.
Why an ecommerce giant like Shopify would theoretically be in favour of Libra is obvious. Designed to be transferred between digital wallets with next-to-zero, or even zero, fees, the digital currency could save both Shopify and the one million plus merchants that have now built there ecommerce operations on the platform, a lot of money.
However, the project still has a lot of work to do to assuage the concerns of international regulators. They are worried that, despite Facebook setting up what it claims is an independent association to run Libra alongside numerous partners from the business and NGO sectors, the move would give the social media company too much power. And access to users’ personal financial information.
The third major sticking point is the fear that cryptocurrencies, which afford transactions a much higher degree of anonymity than the traditional financial services sector, facilitate money laundering.
In announcing its decision to join the Libra Association, Shopify released the following statement:
“Our mission is to make commerce better for everyone and to do that, we spend a lot of our time thinking about how to make commerce better in parts of the world where money and banking could be far better . . . As a member of the Libra Association, we will work collectively to build a payment network that makes money easier to access and supports merchants and consumers everywhere . . . Our mission has always been to support the entrepreneurial journey of the more than one million merchants on our platform. That means advocating for transparent fees and easy access to capital, and ensuring the security and privacy of our merchants’ customer data. We want to create an infrastructure that empowers more entrepreneurs around the world”.
Shopify sees developing economies as a major growth area. However, running an e-commerce business means having a traditional bank account is almost always a necessity. And getting one can be difficult for would-be entrepreneurs in some developing countries. Them being able to easily open a Libra wallet would allow merchants without banks accounts to receive and send payments, and doing so without having to shoulder the burden of significant credit card fees.
Libra was initially targeting a launch this year but resistance by U.S. and European regulators could stall that. It is likely that the digital currency will first launch in developing economies.
Companies That Have Pulled Out Of The Libra Association
Vodafone, Visa, Mastercard, Stripe, PayPal, Mercado Pago, Bookings Holdings, eBay.
Current Members Of The Libra Association
Facebook’s Calibra, Shopify, PayU, Farfetch, Lyft, Spotify, Uber, Illiad SA, Anchorage, Bison Trails, Coinbase, Xapo, Andreessen Horowitz, Union Square Ventures, Breakthrough Initiatives, Ribbit Capital, Thrive Capital, Creative Destruction Lab, Kiva, Mercy Corps, Women’s World Banking.