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<ul><li>At the unveiling of Libra, Facebook promised the new digital currency would change the way the world pays but has told Business Insider Australia that 1.4 billion Chinese and 1.35 billion Indians won’t have access to it when it launches in 2020.</li><li>China’s ban on cryptocurrencies and strict capital controls combined with its blocking of local access to Facebook means it’s “highly improbable” that Libra will enter the Chinese market anytime soon either, according to a veteran Chinese investor.</li><li>At the same time, the US and Europe have voiced their strong opposition to the currency, with US congresswoman Maxine Waters urging Facebook to halt development.</li><li>In developing countries, it will face strong competition from existing financial services such as Kenya’s M-Pesa which launched in 2007 and operates in more than 10 countries.</li></ul>Facebook’s unveiling of <a href="https://www.businessinsider.com.au/what-facebook-currency-libra-will-look-like-and-how-work-2019-6" target="_blank">its new cryptocurrency Libra and financial services subsidiary Calibra on Tuesday </a>was met with great excitement as well as <a href="https://www.businessinsider.com.au/facebook-libra-cryptocurrency-calibra-use-cases-trust-2019-6" target="_blank">great suspicion.</a> Promising to revolutionise the way the world uses money, the initial hype is understandable but there’s one major problem: before it even launches one in three people globally can’t use it. That’s because the 2.75 billion people living across India and China won’t get access to Libra, a spokesperson for Calibra confirmed to Business Insider Australia. Nor will any other country under US-sanctions or with a cryptocurrency ban in place. <a href="https://www.businessinsider.com.au/china-eliminates-all-cryptocurrency-trading-2018-2" target="_blank">China banned cryptocurrencies back in 2018</a> with <a href="https://www.businessinsider.in/facebook-digital-currency-libra-will-clash-with-the-rules-in-india/articleshow/69843445.cms" target="_blank">a ban under consideration in India right now.</a> That excludes citizens in <a href="https://www.businessinsider.com.au/bitcoin-military-zimbabwe-mugabe-2017-11" target="_blank">countries like Zimbabwe</a> and Venezuela <a href="https://www.businessinsider.com.au/cryptocurrency-prices-rising-dash-venezuela-2018-8" target="_blank">who fled to cryptocurrencies when hyperinflation ruined their economies.</a> The exclusion explains why there wasn’t a single Chinese company associated with Libra’s global unveiling. Given it also blocks domestic access to Facebook — <a href="https://www.businessinsider.com.au/future-of-facebook-looks-like-china-wechat-2019-3" target="_blank">a policy Facebook has been fighting</a> — a combination of the two is bound to be met with staunch opposition from its central government. The chances of that changing, however, are slim, according to venture capitalist Terry Hilsberg who advises on Chinese investment. “When you start to think about having a basket of assets like Facebook is doing, you start to get cross-border issues and problems with money laundering and you start to lose control of the movement of money to another country. It’s highly improbable that the Chinese state would be willing to put up with that,” Hilsberg told Business Insider Australia. Libra would threaten to undo the strict capital controls put in place by the Chinese in recent years to prevent money flooding out of the country. That’s not to mention that Facebook’s development of a global payment system lags behind Chinese competitors, AliPay and WeChat Pay Both clearly have significant headstarts on Facebook.AliPay launched in 2009 and quickly took control of the mobile payment market before WeChat Pay followed in 2013 to become a major competitor. Both have been eyeing major expansions of their financial services in Australia this year, according to banking industry reports. “The biggest use case for Libra was Chinese tourists, with 100 million leaving China every year but AliPay and WeChat Pay have spread so rapidly. Now if you look around Sydney, for example, you’ll see them everywhere so that’s becoming less and less of a problem,” Hilsberg explained. The <a href="https://news.nab.com.au/news_room_posts/new-deal-connecting-australian-businesses-to-chinese-visitors/" target="_blank">National Australia Bank (NAB)</a> and<a href="https://www.commbank.com.au/guidance/newsroom/cba-leads-major-banks-with-launch-of-alipay-201812.html" target="_blank"> the Commonwealth Bank partnered with AliPay</a>last year to allow Australian businesses to accept payment from its estimated 900 million users. While that’s small change compared to <a href="https://www.statista.com/statistics/947869/facebook-product-mau/" target="_blank">Facebook’s combined 2.7 billion users</a> including WhatsApp, Instagram, and Messenger, it’s also unlikely to be allowed to engage with anywhere near that number of users. <a href="https://www.businessinsider.com.au/libra-us-lawmakers-demand-scrutiny-facebook-blockchain-currency-plan-2019-6" target="_blank">US Financial Services chair Maxine Waters urged Facebook to stop the development of Libra immediately</a> while <a href="https://www.businessinsider.com.au/libra-us-lawmakers-demand-scrutiny-facebook-blockchain-currency-plan-2019-6" target="_blank">France’s finance minister said it could not be allowed to become a sovereign currency</a>, just hours after the official announcement. While that opposition won’t kill Libra it does indicate the difficult road ahead. But such a payment service isn’t for those markets anyway, according to American futurist Mark Pesce. “Facebook doesn’t need the US or the EU to make Libra a success. Facebook can focus Libra exactly where they can not follow: the billions of unbanked and underbanked who need a payments system but have never had one,” <a href="https://meanjin.com.au/blog/facebooks-libra-is-a-very-big-deal/" target="_blank">Pesce wrote for Meanjin Quarterly.</a> According to the latest statistics, that’s a lot of users. “Globally, 1.7 billion adults remain unbanked, yet two-thirds of them own a mobile phone that could help them access financial services,” <a href="https://www.worldbank.org/en/news/press-release/2018/04/19/financial-inclusion-on-the-rise-but-gaps-remain-global-findex-database-shows" target="_blank">the World Bank concluded last year.</a> 
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But even amongst the unbanked, Facebook will find competitors such as phone payment system M-Pesa which already functions in more than 10 countries worldwide. There Facebook will need to compete with established brands that have already built up the ultimate commodity in financial services: trust. “Even in the developing world, there has got to be an advantage over existing centralised solutions like M-Pesa in Kenya or in Nigeria where there are perfectly good centralised platforms that use mobile phones to have low transaction fees and low entry barriers. Blockchain is not going to displace them even in Africa,” Hilsberg said. In those countries where Libra does gain a foothold, <a href="https://www.businessinsider.com.au/facebook-privacy-hacking-scandal-mark-zuckerberg-cambridge-analytica-2019-5" target="_blank">scandals like those that have plagued Facebook for the last two years</a> threaten to cause unneeded reputational damage. While Facebook might promise to change the way we pay globally, it will need to find plenty more friends if it is going to succeed.

Libra promises to become a global payment system by 2020 but there’s a gaping hole in their plan

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Libra promises to become a global payment system by 2020 but there’s a gaping hole in their plan

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