Titanic Error: Will Non-Profits Play On As Libra Encounters Regulatory Icebergs?

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To say that regulators have offered Facebook’s Libra project an icy reception would be an understatement. Cold stares greet Mark Zuckerberg wherever he travels, it seems: and the effect could be to freeze progress on his pet financial boondoggle.

As payment processor giants MasterCard and Visa announced they are joining eBay, PayPal, and Stripe in abandoning the Libra ship, the association may soon be left with a few non-profits helping Facebook sail it to safe shores.

Those shores are not going to be on the coast of France or Germany’s northern fringes, with the two European powerhouses wanting no part of the social media giant’s proposed “cryptocurrency” that more closely resembles a global payments system.

Mercy Corps, Women’s World Banking, and Kiva were among the original Libra Association members which had the responsibility, among others, of “Keeping the Libra network secure… [through the association’s]… commitments to security and privacy.”

– Libra, Security and Privacy on the Libra Network

Facebook has never appeared to regard user privacy as a priority.

But what were non-profits doing in the Libra Association anyway?

On the Face of It, Giving the Unbanked Access to Finance is a Worthy Cause

Libra estimates that 31 percent of the world is unbanked, which represents around 1.7 billion people. Other groups have put that figure even higher, and there are scores of people also considered underbanked to add to that list of the financially marginalized.

Kiva is a 501(c)3 U.S. nonprofit based in San Francisco. It is a platform whereby people can offer loans to those in the developing world to help them “create opportunity for themselves and their communities.” The loans are not actually interest-free, but the recipients of all interest repayments go directly to Kiva’s local partners, who encounter costs distributing the loans in remote or challenging environments.

Mercy Corps is an NGO of “5,500+ humanitarians … [taking]… on the world’s toughest challenges to help people build better, stronger lives.” Their work has a cross-vertical approach, with activities in humanitarian assistance in disaster areas, work in health, education, agriculture, and poverty reduction, among others.

Women’s World Banking champions break down the gender divide in opportunities and financial inclusion. The group “designs and invests in the market-driven financial solutions, institutions, and policy environments in emerging markets to create greater economic stability and prosperity for women, their families and their communities.”

It is a New York-based not-for-profit. 

To the extent that all three non-profits accept donations, one turning them into loans, and, (Kiva aside) also receive funding from institutional donors, joining the Libra Association makes some intuitive sense.

The seamless movement of money across borders would increase their efficiency, making cryptocurrencies beneficial to NGOs. (Begging another question… what was wrong with just using bitcoin?)

But Are The Benefits Worth The Cost of Being Tarred by Facebook’s Reputation?

When corporations like MasterCard and PayPal flee from the Libra family, which appears to be at least in part for reputational reasons (whether they would admit that or not), it is obvious that the stench of Facebook has spread to its yet-to-materialize Libra cryptocurrency.

And for good reason. Facebook is neither trusted nor trustworthy. Why would Libra be?

Crypto Briefing reached out to all three non-profits for comment in light of PayPal’s departure. Only Kiva responded. While the organization refrained from commenting on PayPal’s exit from the association, a Kiva spokesperson said:

“Kiva’s mission is to empower people who are left outside of the existing financial sector. We accepted the invitation to join Libra Association as a Founding Member (exempt from the $10M fee) because we believe in the potential and necessity of global, multilateral coalitions to help solve global, multilateral challenges like providing financial access to the 1.7 billion adults who are today unbanked. Libra Association and its growing network of partners are positioned to be the beginning of this global force for good.”

– Kiva statement on their involvement in the Libra Association

Kiva’s rationale appears reasonable. Their $10 million application fee was waived, and we might assume that was also the case for Mercy Corps and Women’s World Banking, absent comment. Being part of the association would mean they could promote the interests of the financially excluded and ensure the voices of the marginalized are heard.

It could be also argued that the flight of the payments firms places the non-profits in a better position to make Libra a currency that truly is designed to bank the unbanked.

We can only hope.

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