Zhijun Zhang, Lead Information Security Architect,
The World Bank Group, DiFi Alliance Scholar
Today, the methods available for people to make cross-border payments leave much to be desired, especially for under-developed countries and the unbanked population. High fees, slow delivery, and the lack of service in some areas are some of the difficulties being experienced by millions of people on a regular basis. The emergence of digital currencies brings an opportunity to change the situation for the better. However, the lack of a stable, compliant, and easy to use digital token that can act as the medium for such payments has hindered the general availability and wide adoption of this new way of making a cross-border payment.
Libra, as proposed by Facebook and its partners, provides a new option for making payments both domestically and overseas. Based on its whitepapers, Libra does offer the following potential benefits:
· Easy of use. Users of Facebook Messenger and Whatsapp could access the service without downloading additional software, and potentially can avoid the hassle of managing the cryptographic keys associated with their Libra wallets.
· Pervasiveness. Given the penetration of the Facebook applications around the world, the Libra service will make sending money to someone much more available than before.
· Auditability. Given that Libra transactions will be recorded on an immutable database that can be viewed by anyone, all activities involve Libra can be examined and verified.
· Platform for innovation. Libra provides ways for other developers to write custom code to execute on the Libra platform. It also allows Libra to be held in other digital wallet, which means other mobile apps can leverage the Libra platform for exchange of Libra tokens.
Given the problem Libra can solve, and the additional opportunities Libra brings, the call for action to both Facebook and the government includes the following:
· Regulatory bodies should provide the right set of guard rails for this new service to operate in a way that can benefit its users across the world and at the same time minimize the risk to both local and global financial systems.
· Facebook and partners should strive to make this new service available to the unbanked and even the disconnected. This should include making the service available on feature phones on 3G or even 2G networks, and allowing those who are not connected to the Internet to receive payments on a “hardware wallet” (e.g. a rechargeable cash card) should be part of the design.
· Lawmakers and other branches of the government should strive to establish an efficient privacy regulation regime, so that organizations whose business involve the handling of personal data could adhere to the requirements with reasonable amount of effort.
· Third-party attestation of privacy compliance should be standardized and practical, so that consumers can have a reliable source to find indication of whether a service provider can effectively protect their personal data, and service providers can have measurable privacy benchmarks to reach.
Overall, innovation should be encouraged and supported by a clearly-defined and efficient regulatory framework. Legislation bodies and enforcement agencies should all define and publish clear standards for service providers to meet. With a clearly defined regulatory regime, innovators have a chance to do the right things and earn the trust of their customers over time. The ultimate goal is to serve the needs of people while protecting their rights, and introduce diversity and competition in the financial system without compromising its stability.
About the Author
Dr. Zhijun William Zhang is the lead information security architect at The World Bank Group, where his team is responsible for security architecture design and assessment of all business solutions. Zhijun is a technology enthusiast and an active participant of the World Bank Group’s Innovation Lab activities, including many blockchain use cases. Before joining the World Bank Group, Zhijun worked at The Vanguard Group, a large financial service organization in the US, in various capacities, including user experience design, emerging technology research, system architecture, and information security. Zhijun received his bachelor’s and master’s degrees in computer science from Peking University, and Ph.D. in computer science from the University of Maryland.