Mastercard’s CEO Speaks On Withdrawal From Libra Project
Mastercard’s CEO shared his views on Facebook-led cryptocurrency Libra, explaining the reason for the withdrawal from the project – concerns over data managements, business model viability, and compliance, reads FT article from February 3.
Mastercard business would hugely benefit from further globalisation and digitisation, while national limitations for payment systems are becoming a non-wise choice, shared Ajay Banga, highlighting the inefficiencies of current systems:
“The economic cost of building siloed systems in a world where citizens travel globally is really stupid, and where crime travels globally is even more stupid, and where technology is completely global is even three times more stupid”
Therefore, initially Mastercard was interested in the idea of global currency, which was proposed by Facebook-led project, and has joined the Libra Association. Yet, there were several reasons, that stopped the company from further participation.
At first, per Ajay Banga, Libra Association did not give a full commitment to “not do anything that is not fully compliant with local law” in writing, despite initial talks KYC or anti money laundering procedures.
Secondly, Banga shared concerns over how Facebook treats data, highlighting that scandals and mistreatment at the global payment scale could revert people from “digital transparency” back to cash:
“An event like Facebook-Cambridge Analytica actually could set you back because it could create the feeling among people like you and me who say, ‘do I really want everything to be visible to other people? Because other people are taking advantage of what they see of me. I don’t like that. I want my life back.’”
Finally, Mastercard’s CEO shared doubts over the viability of Libra’s business model and its dedication to the declared mission to promote financial inclusion, in the light of Libra Association proposing to link the currency to its proprietary digital wallet Calibra:
“It went from this altruistic idea into their own wallet. I’m like: ‘this doesn’t sound right’ . . . For financial inclusion, the government has got to pay you in this [currency], you’ve got to receive it as an instrument you can understand, and you have to be able to use it to buy rice and cycles. If you get paid in Libra [coin] . . . which go into Calibras, which go back into pounds to buy rice, I don’t understand how that works.”
Image Credit: The HOW Institute for Society