In a new blog post published on Medium, Facebook’s head of blockchain David Marcus calls out the existing financial services system as too old and past the point of an upgrade.
Entitled “Why building a new protocol for money is the only way to truly change the game for people”, the report details why existing payment rails need to be scrapped and replaced with a robust new system that uses blockchain technology.
The payments veteran and former president of PayPal takes a look at the existing limitations of the current financial system.
“The existing “money networks” are closed and are not well interconnected. There are regional payment networks (ACH, European Payments Council,…), inter-bank networks (SWIFT, RT1, …), central banks/bank networks, and many more. Some of these systems were built in the 1960s and 70s, and while they’ve received upgrades since then, they often live on top of legacy, fragmented infrastructure.”
Marcus also notes that moving money around the globe requires multiple intermediaries, such as as global legacy platform SWIFT, and pools of money that are readily available in order to exchange different currencies. These processes cause delays, friction and high fees.
According to Marcus, Facebook’s ambitious plans cast aside cumbersome and inefficient traditional processes that are not visible to the average consumer, but are reflected in high fees, delays and basic financial services that remain inaccessible to billions of people. Libra, he argues, will move money like email, and it will do it instantly and in every corner of the globe.
“Just like SMTP allowed any email provider to interoperate with other email providers, Libra can be the ‘protocol’ that will enable fast, cheap, and stable money movement across service providers, institutions, and people all around the world.”
Libra has yet to launch and has been mired in controversy with policymakers in the US and Germany calling for it to be shut down, while Bitcoin enthusiasts are calling the initiative a private, centralized digital currency that is not a cryptocurrency.
Libra is a fine digital currency, but it’s not a cryptocurrency.
Cryptocurrencies have value precisely due to decentralization.
Muddling the two may be in Libra’s interests in the short term, but is against everyone’s interests in the long term.
— Naval (@naval) June 23, 2019
You can check out Marcus’s full post here.