Facebook, WhatsApp Pay, Libra/Diem, CBDC news — Diem live in March?

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Boss makes a dollar, I make a Diem

Diem is the current name for Facebook’s 2019 Libra scheme, whose crash and burn I document in full in Libra Shrugged: How Facebook Tried to Take Over the Money. Diem plans to go live by the end of March, with the Diem Dollar — a single stablecoin token. [CoinDesk]

There’s no evidence that Facebook cleared this with regulators in the US, the EU and Switzerland — as they pinky-swore to US Congress they would absolutely do before launch. But I’m sure they wouldn’t go back on their word.

On current evidence, the Diem blockchain’s testnet can handle only 24 transactions per second, rather than the 1000 tps the Libra white paper originally aspired to — either it can’t go faster, or they’ve literally never tested it going faster. This is not quite enough to run a world currency. Perhaps it’ll be faster by release day. [news.bitcoin.com]

WhatsApp Pay India: whoops, Facebook

Facebook reduced its focus on Libra/Diem, and is concentrating on WhatsApp Pay, particularly in India — where WhatsApp Pay is a front-end to India’s Unified Payments Interface (UPI), just as Google Pay and so on are.

WhatsApp Pay India is presently running as a limited pilot programme, with 20 million users. In December 2020, WhatsApp Pay sent 300 million rupees, across 810,000 transactions. In January 2021, about 360 million rupees was sent across 560,000 transactions. [Bloomberg Quint (paywalled)]

For comparison, total payments through UPI in January 2021 were 4.3 trillion rupees, across 2.3 billion transactions.

WhatsApp insist that this is deliberate — they’re taking it slowly, for the best possible customer experience. Also, the National Payments Corporation of India isn’t letting them go any bigger as yet. [Economic Times]

Facebook’s reputation really isn’t helping. Localcircles surveyed 17,000 users across India. 92% of WhatsApp users won’t use the payment feature if payment information is shared with Facebook — and 79% won’t use WhatsApp Business Accounts. When Facebook announced in August that it was merging user data from WhatsApp, 5% deleted WhatsApp entirely, while 22% reduced their usage of the app. [Localcircles]

I have the use case for CBDCs here somewhere, just give me a moment

The idea of a CBDC perennially fascinates central bankers, tempted by blockchain magic (Libra Shrugged, chapter 15). Peter Bofinger, Thomas Haas, University of Wuerzburg warn: Central bank digital currencies risk becoming a gigantic flop — because there’s no clear use case. [VoxEU]

Riksbank, the Swedish central bank, has published a paper suggesting that CBDCs will not be cash-like — specifically,  they won’t be anonymously tradeable offline. This also means that doing a CBDC won’t solve the problem Riksbank has — that everything in Sweden is cards, not cash, and that they need a replacement for cash. So what precisely was the use case for CBDCs over existing commercial bank card-based money, then? [Riksbank]

Mastercard takes cryptos! If CBDCs count

Mastercard will let merchants accept cryptocurrencies at some point in the future, apparently! [Mastercard blog]

Mastercard dumped Facebook’s Libra in 2019 (Libra Shrugged, chapter 12). Then-CEO Ajay Banga told the Financial Times a bit later: “when you don’t understand how money gets made, it gets made in ways you don’t like.” [Financial Times, paywalled]

Just after dumping Libra, Mastercard listed “Mastercard’s Principles for Blockchain Partnerships,” the things Libra failed at: [Mastercard blog]

  1. Provide strong consumer protection, including privacy and security of the consumers’ information and transactions;
  2. Deliver a level playing field for all stakeholders, including but not limited to financial institutions, merchants, and mobile network operators to contribute and benefit from the blockchain networks; and
  3. Operate in full compliance with all applicable laws and regulations, including those applicable to anti-money laundering, and consistent with the economic systems of the countries the network operates in.

Zero existing cryptos deliver all of these. Making consumer protections hard or impossible is the fatal flaw in crypto’s irreversibility.

Mastercard has a new CEO since then, Michael Miebach — but the new list of requirements is similar, and there’s still zero existing crypto delivering all of them:

First and foremost we need consumer protections, including privacy and security of consumers’ information — the same level of security people have come to expect in their credit cards. Next, strict compliance protocols will be needed, including Know Your Customer, a requirement meant to snuff out illegal activity and deception in  payment networks. Also, these digital assets must follow local laws and regulations in the regions they are used.

Lastly, people will want to use these digital assets for payments, so that is one of our criteria too. To reach our network, crypto assets will need to offer the stability people need in a vehicle for spending, not investment.

But I think Mastercard wouldn’t have put out this press release without a coin in mind. So I’m guessing they’ve done, or are doing a deal, with someone. Probably not Facebook, though.

The one thing within a mile of meeting all of Mastercard’s requirements would be a CBDC. So we have the Island Pay prepaid Mastercard, carrying Bahamas Sand Dollars — my favourite example of a successful CBDC initiative. The press release mentions Mastercard’s interest in blockchains and stablecoins, and talks up CBDCs as an example. Not pointed out: that this would work identically to any existing card with ordinary Bahamas dollars on it. [Press release]

World’s smallest Celo

Morgan Beller, the original creator of Facebook’s Libra, has signed up as an advisor for Diem competitor Celo. She did a puff piece interview with The Block. Though she didn’t talk about Libra — “Beller declined to talk about the project in the interview.” [The Block]

Celo is an attempt to do what Libra/Diem claimed to be doing — a bunch of Silicon Valley venture capital firms and small crypto exchanges have put together a basket-based stablecoin, and they say they want to bank the unbanked. [Celo]

The Celo Dollar (CUSD) is an ERC-20 token running on Ethereum. It was launched to the public in November 2020. The Celo Dollar basket is not made of actual money — it’s half Celo’s freely floating CELO token (a separate thing from Celo Dollars), and the other half is a pile of other cryptos. This is stabilised algorithmically. [Celo; The Block]

The free-floating CELO token is on a lot of exchanges, including Coinbase, and has daily volume swinging wildly between a few million dollars and over $200 million according to CoinMarketCap (for what that’s worth). [CoinMarketCap]

The Celo Dollar does about $100,000 a day per CoinMarketCap, and it isn’t on a lot of exchanges. Almost all volume is Bittrex. OKCoin and Coinlist Pro have tiny volumes. I saw Celo Dollars trading at $3.19 on Coinlist a couple of weeks ago. [CoinMarketCap]

Beller talks up Celo’s remittances story: “So Celo has been helping people send remittances for less than one cent fees during the pandemic, which you know, it gives you goosebumps.”

There’s no detail whatsoever — who did this, where? How did they convert the Celo Dollars to actual money at each end?

I asked Celo about it, and they haven’t answered — but I’m guessing that Beller is talking about the tiny pilot Celo ran in the Phillippines in April 2020: “Approximately 30 BeamAndGo customers from Singapore and their beneficiaries in the Philippines participated in a fully digital remittance pilot in April, with the Singapore cohort sending testnet Celo Dollars to the Philippines cohort.” [Medium]

So of course it was cheap — they were just sending tokens over the testnet.

The Impossible Missions Force … no, hold on

Tobias Adrian and Tommaso Mancini-Griffoli of the International Monetary Fund have a new paper out: “Public and Private Money Can Coexist in the Digital Age”. [IMF]

At present, money is mostly created by commercial banks making loans, and your bank account is liabilities against your bank (it’s your money, they’re just holding it).* One of the issues with CBDC is that the central bank issuing more of the money risks substantially displacing the commercial banks.

* well, legally in the UK it’s their money, in case of bankruptcy or similar. But functionally it’s yours, in a way that a similarly-sized credit card limit isn’t, and that’s what “liability” means.

So Adrian and Mancini-Griffoli suggest a form of blockchain-ish token-based CBDC system that doesn’t make commercial banks obsolete.

Adrian and Mancini-Griffoli aren’t suggesting a specific system — but the People’s Bank of China has now decided that the digital yuan on their DC/EP system will not be central bank liabilities, but liabilities of their commercial bank partners. That is, they’re doing WeChat Pay or Alipay, but it’s the PBOC.

I didn’t end up mentioning it in Libra Shrugged, but Adrian proposed a very Libra-like scheme in May 2019, just before Libra was first announced — basically SDRs (Special Drawing Rights), but done as a proper currency as blockchain tokens, run by the IMF. [IMF] Yanis Varoufakis also proposed a basket currency run by the IMF in October 2019, rather than having Libra run by private companies. [Project Syndicate]

That said, “let’s use SDRs as an actual currency” is a perennial proposal. Austrian Economics mainstay Friedrich Hayek proposed something similar in his book Denationalisation of Money — run a Libra-like basket. Hayek advocates competing private corporate currencies, and assumes the public will prefer whichever has the lowest inflation. [Mises Institute]

Hayek’s idea was tested, and failed hilariously, in the altcoin era and later the ICO era, in which companies printing private scrip dived headlong into a race to the bottom — and it turned out the reason to print your own private money was to accumulate as much as possible of the actually-good money that was widely accepted.

(Hayek is awful to read. Such a horribly pompous writer. Also, part of the reading to do on this stuff. I suffered for my art, now it’s your turn.)

I was actually surprised not to find any smoking gun linking Libra to Denationalisation of Money — but I find it hard to believe that Libra’s creators didn’t read it, looking at that book and at their plan. Inasmuch as bitcoiners read things, which they don’t. Keep in mind that the Facebook blockchain crew are the guys who failed to notice that their wizard Libra idea was the same sort of money market fund scheme that had triggered a global financial crisis just eleven years before (Libra Shrugged, chapter 7).

Scammers? In my stablecoin?

projectdiem.io is a scam sale of alleged Facebook Diem tokens. [Project Diem, archived] News.bitcoin.com got fooled by it. Don’t you be fooled. [news.bitcoin.com, archived]



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