Could Facebook be aiming to set up a new identity standard with its digital currency wallet plans?
After a keen exploration of the Facebook Libra cryptocurrency description, many commentators say that there is nothing remarkable there. However, others have chosen to focus on the last page of the white paper where Libra is introduced. It reads that:
“[a]n additional goal of the [Libra] association is to develop and promote an open identity standard. We believe that a decentralized and portable digital identity is a prerequisite to financial inclusion and competition.”
That suggests the creation of an open identity standard. However, most are convinced that the cryptocurrency will never launch in its current form unless it heeds to the policies and rules set by the regulators and governments around the world.
Besides the crypto, identity seems to be at the center of the Libra proposition. The US Congress had a key question for David Marcus, the Libra co-creator in the hearing that took place in July. Congress was keen to know how parties will guarantee that the beneficial owner or user of crypto or wallet is precisely identified.
Facebook’s Vice President of product for the Calibra wallet, Kevin Weil, answered that question. He explained that Calibra users must submit a government-issued ID when they want to buy Libra tokens as expected.
Facebook revealed that the wallet addresses in a Libra transaction, a timestamp, and the amount transacted will be public since they will be supported on a shared ledger. But, as Libra further stated, all data related to “know your customer” or anti-money laundering regulations will be stored by the wallet providers including Calibra.
These wallet providers will be tasked with binding the wallets to real-world businesses and people. Since Libra is designed in a manner that anyone can connect to the network and set up a wallet, there could be many wallets. However, Calibra may be in the best position to win the race for population scale. Thus, Calibra’s approach to identity is quite essential.
Facebook’s Libranomics Raises Issues
If Calibra will have the ability to convert various government-issued IDs into a basic, interoperable ID, it will come with great value. Many other entities including banks may become interested to try using the same standard.
In places like the United Kingdom, this feature will deliver the new Digital Identity Unit (DIU) goal. That goal was set out by the Cabinet Office and Department for Digital, Culture, Media, and Sport aiming to come up with one login for the bank accounts and pension account.
Nonetheless, it is not just the ID that requires interoperability; it is the credentials that come with it. That is how reputation economies are created. Calibra wallets can store a user’s Uber rating, “IS_OVER_18” credential, and their airline loyalty card in a manner that makes them useful.
Interestingly, if a user wanted to register for something like a dating site, they can log in using Calibra. Calibra would then automatically provide the required credential or guide them on how to get the information from a Libra partner like MasterCard. Thus, it appears as this may eventually turn out to be a crucial aspect of the Facebook initiative.
What if the Calibra wallet becomes an important asset for most people around the world, not for the money but for the reason that it contains identity? If one gets a Calibra wallet by presenting their passport that is alright. But if a user lives in a developing country and they have no passport or any type of formal ID, facebook may argue in the future that a Facebook profile will act as an adequate substitute.
Facebook has the records of who its users interact with, they have WhatsApp address books, and they can even track the location of their users. Thus, if anyone has had a Facebook profile for several years, that identity could be more than adequate to open an account to hold a certain amount of Libra.
That could be a perfect opportunity to bring the unbanked individuals and their transactions into the financial system. Thus, in most parts of the developing world, this strategy can replace the Know-Your-Customer (KYC) requirements.