Facebook’s ‘consortium’ may lose its banking virginity.
The cryptocurrency project launched last month by the social media giant has been seen as the death knell for big banks. However, some have diverged, veering closer to Facebook rather than chiding away. The Royal Bank of Scotland [RBS] is one such player.
According to Yahoo Finance, RBS has entered into discussions with Facebook about Project Libra and how it could be a prominent player on the platform. Prior to the launch of Libra, Facebook announced the creation of a ‘consortium,’ which would control the internal governance of Libra to give it that decentralized touch.
It should be noted that this ‘consortium’ has a $10 million buy-in and include the likes of Mastercard, Visa, Uber, Lyft, PayPal, Coinbase and more. David Marcus, Head of the Facebook cryptocurrency project, stated that one of the main revenue models of Libra would be to allow these players to develop on the platform.
None of the 28-member strong consortium members are big banks.
RBS’s Head of innovation, Kevin Hanley, confirmed talks with Facebook on 9 July. He stated,
“We’re in discussions with Facebook around Libra and what it might be and where it might go.”
Hanley added that there was “no punchline yet.” However, the talks were meant to “engage” with the Menlo Park giant, as opposed to “waiting and finding out” later, when Libra launches in 2020.
The introduction of a big bank into the ‘consortium’ does seem unlikely as it would defy the creation of a cryptocurrency and would certainly tarnish the “decentralized nature” claim of Libra, which is hanging by a thread. Hanley is well aware of this divide saying,
“I think Facebook themselves were very keen in the original announcement that there wasn’t a bank in the original 20 odd that were there. You should ask Facebook. I think their thinking around Libra is still relatively early in its inception as well.”
Internally as well, Facebook is keen on maintaining distance between Libra and the banking elite. However, as the launch date nears, that distance will likely diminish.
Marcus told The Information,
“We have had conversations with banks. We still have conversations with banks. And my expectation is that by the time this thing launches next year you will have banks that are going to be members of this.”
With Marcus opening the door, albeit slightly, to a big bank’s eventual inclusion in the consortium, Hanley is already preparing his marketing pitch to Zuckerberg if RBS is approached with the opportunity.
“There’s all sorts of things that we can bring to the party, whether it be our foreign exchange capability, a whole load of merchant acquiring capability that they would be equally interested in, there’s a whole load of payment functionality that could be helpful to them.”
Hanley added that the prospect of this alliance is positive because RBS and Facebook might be closer than you think. “Our relationship with Facebook goes back a long way,” he stated, adding that they know the “Facebook guys very well.”
Libra’s objectives, at the moment, remain anyone’s best guess. Initially touted as a retail replacement payment tool that would challenge state-based platforms, the crypto is also seen as a stablecoin-successor given its fiat-basket-backing. Regardless of the ambition, one important aspect of the entire project is the consortium and the global reach of its members.
The RBS executive emphasized on this very “ambition” which, according to him, Facebook are thinking hard about, and so is the consortium. He concluded,
“The other members of that consortium are thinking about where they want to be, and how they grow the people that they want around the table, the assets that that group needs around the table to be successful. We want to be part of that conversation.”
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