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Your money in Facebook's control

July 8 · Issue #40 · View online
iAfrikan Daily Brief
The United States House of Representatives Committee on Financial Services has written a letter to Mark Zuckerberg, Sheryl Sandberg (COO at Facebook), and David Marcus (CEO of Facebook subsidiary, Calibra) asking them, and their partners, to halt any development of their yet to be launched digital currency, Libra. The letter raises several concerns around why US policymakers need to investigate the viability of the currency first before Facebook & Co. can go ahead and implement it.
Most of the concerns were somewhat expected given that, as highlighted in a previous issue of this newsletter, the social media platform is somehow morphing into a country of sorts with the introduction of Libra - People’s Republic of Facebook. Also, it’s understandable given that Facebook is partly incorporated in the USA and listed there as well. However, Facebook and its partners have made it quite clear (in the white paper too) that Libra is targeted at developing countries.
So, why are US policymakers so worked up about it? Also, why are they so concerned about Libra and say, not Bitcoin? Lastly, would you have your money in Facebook’s control, will it honestly benefit Africa?
Mark Zuckerberg and Sheryl Sandberg are currently on the receiving end of criticism from the US House of Representatives Committee on Financial Services regarding the planned launch of the Libra digital currency.
This might sound frivolous but it is easier and possible to write to Facebook’s Zuckerberg and Sandberg regarding Libra compared to trying to write to Satoshi Nakamoto. In this case, there are real people and organizations that can be held accountable. Secondly, and as they allude to in the letter, they feel Libra as a threat to the US Dollar and the country’s monetary policy, despite it being merely a stablecoin and not a cryptocurrency in strict terms. There’s also the matter that should Libra ever get into trouble (eg. not be able to guarantee customers withdrawals etc.), the US government in one way or another would need to step in to protect Americans as we’ve seen it do before with some of the country’s large banks (side note: this is exactly what Bitcoin avoids, but alas. A discussion for another day).
However, more importantly for us in Africa is, does Libra offer any of us any value? Does it help us with anything we are struggling with currently? Does it make life easier?
To use and transact in Libra, users will have to download and run the official wallet, Calibra (a subsidiary company of Facebook). From what I’ve seen and what has so far led me to say in its current form Libra will struggle to gain traction (unless they address the following two issues) is that to use Calibra one will require a bank account and a government issued ID.
If this infographic and the process doesn't change when Libra and Calibra are lauched in 2020, they are likely going to see many in Africa who are unbanked (who Libra is supposed to help) stop registration at point 2 as they don't have bank accounts.
It’s no secret that Africa has a high number of unbanked people mainly as a result of low income and unemployment. As such, it is mind boggling that a product punting financial inclusion would require users to first have a bank account before using it. However, it’s possible that this will change by the time Facebook launches the digital currency and wallet in 2020. If it doesn’t, it could prove to be a stumbling block for gaining traction especially across Africa.
The second issue is around the requirement of government issued ID.
I'm quite curious to see how Facebook will handle this in countries where there are no government issued IDs except passports and voting cards.
This one will be interesting to observe as I’ve experienced it first hand recently. When working with colleagues on Maroo Africa (which officially launches on 31 July 2019), part of the work has been community development in a sense that we were helping music artists across the continent secure their own .africa domain names and websites for free. Part of our requirement was that they needed to submit a government issued ID to ensure their free .africa domains are registered officially in their names and that they own them. During that process, we have received all forms of “identity documents” ranging from legitimate government IDs, passports, voting cards and in cases where the music artist had no government issued ID, they would send all manner of screenshots and documents (non-government issued) to prove they are who they say they are. This is because in many African countries, eg. Nigeria, there is no real organized government ID system. Immediately this makes it rather interesting how Facebook is going to verify identity in such cases.
What I do know though, is that it seems they’ve been preparing for this for a while because they acquired a company that verifies government issued IDs in 2018. When acquiring Confirm Facebook at the time said it was to keep its community safe.
There’s also other issues, which are valid but the average Facebook user in Africa is not aware of, raised by the US House of Representatives such as customer data (read money) privacy given Cambridge Analytica and other Facebook data breaches, cyber security and more. Despite all this, I can still foresee Libra gaining traction in Africa if it can have transaction fees lower than current remittance services and navigate around the requirements of a government issued ID and a bank account.
As for America’s policymakers blocking the implementation of Libra, well, there’s a reason why the Libra Association is legally a Swiss organization 😉. However, would you trust Facebook with your money?
♎ The United States House of Representatives Committee on Financial Services has written a letter to Mark Zuckerberg and Sheryl Sandberg requesting they halt development of Libra. Link
💸 Hackers managed to breach Zambia’s ZANACO bank’s systems and conduct a phishing exercise which saw thousands of customers lose their money. The hackers targeted the bank’s mobile money platform. Link
🥽 The ability to embody a virtual avatar blurs the lines between what’s going on in the headset and what’s happening in real life. The onus is on the future designers and developers of this virtual reality technology to ensure this power, of embodiment, is used for good. Link
Read This Book
This week’s recommended book is recommended by my colleague, Ndzalo Mpangana.
The book, Only the Paranoid Survive: How to Exploit the Crisis Points That Challenge Every Company by Andrew S. Grove (former CEO of Intel), is a must read for any business leader. Steve Jobs, when he was CEO & founder of Pixar Animation and Apple Inc once said about the book:
“This book is about one super-important concept. You must learn about Strategic Inflection Point, because sooner or later you are going to live through one.”
Under Andy Grove’s leadership, Intel has become the world’s largest chip maker and one of the most admired companies in the world. In Only the Paranoid Survive, Grove reveals his strategy of focusing on a new way of measuring the nightmare moment every leader dreads when massive change occurs and a company must, virtually overnight, adapt or fall by the wayside. Grove calls such a moment a Strategic Inflection Point, which can be set off by almost anything: mega-competition, a change in regulations, or a seemingly modest change in technology. When a Strategic Inflection Point hits, the ordinary rules of business go out the window. Yet, if managed correctly, a Strategic Inflection Point can be an opportunity to win in the marketplace and emerge stronger than ever.
In the book, Grove underscores his messages by examining his own record of success and failure, including how he navigated the events of the Pentium CPU flaw which threatened Intel’s reputation during 1994.
Taken directly from the book word for word, a Strategic Inflection Point is a time in the life of a business when its fundamentals are about to change. That change can mean an opportunity to rise to new heights. However, it may just as likely signal the beginning of the end. Strategic Inflection Points can be caused by technological change but they are more than technological change. They can be caused by competitors but they are more than just competition. They are full-scale changes in the way business is conducted, so that simply adopting new technology or fighting the competition as you used to may be insufficient. They build up force so insidiously that you may have a hard time even putting a finger on what has changed, yet you know that something has. 
In conclusion, in South Africa we have heard announcements from MultiChoice, Standard Bank, IBM and Nedbank that they will be retrenching thousands of. In some cases, technological change has been said to be the cause of the retrenchments. Are they facing a Strategic Inflection Point in their business? Read the book and make up your opinion.         
Only the Paranoid Survive: How to Exploit the Crisis Points That Challenge Every Company
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