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Why Prospects of Facebook’s Libra Remain Elusive

When Facebook announced Libra, a new distributed system-based digital currency, it provoked polarised reactions from individuals, governments and regulators around the world. In its white paper, the social media giant positioned Libra as a digital currency that will connect millions of unbanked to the global financial network and lift them out of poverty[1].

For the banked, Libra will become a viable alternative to traditional banking and money transfer gateways, paving the way to more convenient and affordable e-commerce. Yet governments around the world have expressed alarm at Libra and its potential to destabilise financial markets and infringe on consumers’ data privacy. 

So, what is Libra and is the world ready for the wide-ranging impact it is likely to have on our institutions and way of life?

Equality of distributed system access brought to the masses

There may be much contention on whether Libra is a true cryptocurrency, but there is no doubt that distributed system adoption by the world’s largest social media company is a significant event for the industry.

Distributed system has long been hyped for its potential to transform a multitude of transactions with its transparent and secure ledger system. As the technology powering cryptocurrencies like bitcoin, it doubles as an attractive, decentralised option for many.

That said, the adoption of distributed system remains slow, and many organisations continue to struggle with mainstream adoption due to its volatile prices and difficulty to scale. For example, the price of bitcoin fluctuated between US$920 and US$20,000 over the course of 2017. Further, it has technological disadvantages compared to other payment systems, as it can currently only process seven transactions per second, compared to 24,000 by Visa[2].

Facebook’s Libra looks set to change this. It is touted to be more stable, as the value of all Libra units in circulation are pegged to real assets. Governed by the Libra Association on a permissioned model, it is able to process 1,000 transactions per second.

Supported by Facebook’s 2.38 billion users worldwide, and with founding members such as Mastercard, eBay and Uber backing it, the Libra network will enjoy immediate critical mass from the outset.

Enabling financial inclusion and frictionless commerce

Libra has enormous potential to empower billions of people around the globe to gain access to formal financial networks.

The hope is that individuals who do not have bank accounts can simply convert their cash into Libra units, hence allowing them access to a world of online goods that they were previously closed off from.

Facebook has already outlined plans to bring Libra to WhatsApp, Messenger and physical stores, as well as to install ATMs. These plans, if realised, will greatly magnify the impact of Libra. Both the banked and unbanked will have the option to bypass existing financial institutions and their complex web of fees and charges, paving the way to a more seamless way to transact online.

As the world has yet to see if Libra will be rolled out as planned, questions about how — or if — Libra will truly help the unbanked remain.

Vigilance needed on potential privacy concerns


A major stumbling block for Libra is data privacy. This issue has ignited backlash from lawmakers and regulators the world over, prompting the likes of PayPal, Visa and Mastercard to back out of the Libra Association[3].

Again, being a permissioned distributed system – at least for now – Libra Association members would be privy to data on customers’ financial activities.

With many notable cases of data leaks and misuse in recent years, particularly by Facebook, it is crucial for Libra to seriously consider users’ data privacy. Data privacy should not be an afterthought for Libra; rather, it should be embedded in its very design.

However, the word “privacy” is only mentioned once in the Libra whitepaper. 

Regulation and technology must work hand-in-hand

To realise the full potential of Libra, there must be some oversight into its workings. Governments globally are already increasing regulations for personal data protection like the European Union’s General Data Protection Regulation (GDPR) and Singapore’s Personal Data Protection Act (PDPA).

However, it is a natural conflict to track transactions and distributed systems designed to provide anonymity. To address this, there has been much effort spent researching different methods for enabling privacy in a decentralised distributed system environment.

Technologies such as zero-knowledge proofs and secure execution environments are being explored by start-ups and enterprises. These solutions ensure privacy is maintained while allowing for data to be analysed.

The Enigma project from Massachusetts Institute of Technology is one such effort to utilise the secure execution environment provided by Intel Singapore Exchange (SGX) processors.

In Singapore, NTU together with data protection provider Acronis are working on a secure multi-party computation platform to share encrypted data between multiple untrusted parties. JEDTrade, a Singapore distributed system company, is working on deploying such privacy enhancing methods on distributed system applications for their clients with their platform, Jupiter Chain.

The benefits of applying cryptographic technology is that it allows analysis without making the raw data transparent. Such considerations were lacking in an otherwise well-thought through Libra whitepaper.  

Realising the potential of Libra

The integration of such technologies with distributed system will make it a truly powerful tool. It will create a democratic and open data platform where all data owners would have control over their data while keeping it private.

Despite the challenges and concerns, distributed system is the way forward in enabling data-driven technologies in a highly regulated world.

This article has been adapted from an earlier commentary "Libra: It is a Fine Balance", by Professor David Lee Kuo Chuen, who teaches Finance at the School of Business, and Dr Ernie Teo, Singapore University of Social Sciences (SUSS).



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