Go Digital, Pakistan Should Remove Bottlenecks To Tap Crypto Markets

Go Digital, Pakistan Should Remove Bottlenecks To Tap Crypto Markets
As the paradigm of free currency becomes admissible in the crypto world, silicon valley giant Facebook is going to play its shot as the world seems to move into a cashless and digital economy especially in the wake of the novel coronavirus. Its digital currency “Diem” (formerly known as Libra) being considered as an upcoming rival to the current market leader of crypto-currency “Bitcoin” was supposed to be launched in Feb 2021. However, Facebook delayed it for unknown reasons but assured its customers of good news soon.

The main ambition of Diem is to help the layman who does not have any access to the capitalist banking system, to share his fair share and access in the digital monetary world. It would be unlike Bitcoin and other cryptocurrencies that flow freely and are decentralized, unpredictable and highly volatile. Diem will work as a stable coin backed by a basket of government currencies (primarily US dollar and other assets). The social media behemoth is planning to empower its digital currency by a centralized system being governed by supply and demand and pegged to fiat currencies. Diem would be acting as a borderless bank for the netizens as it records the transactions only adding a group of trusted parties, which is surely not in the case of Bitcoin being a permissionless currency. Diem will be mainly asset-backed by fiat currencies, thus making it low volatile and more sustainable.

To help Diem make a one-tap-able currency, Facebook is developing the Diem wallet named Novi (formerly known as Calibra). Novi will be managed and controlled by a Facebook subsidiary known as Novi Financial. Netizens would be able to buy Diem from the Novi wallet in exchange for fiat currencies. Facebook which has a severe history of consumer data leaks, assures its customers of their privacy concerns beforehand. All the transactions will be monitored and controlled by its subsidiary Novi Financial and any sort of consumer data will not be shared unless it is formally authorized by the management of Novi Financial and Facebook.

However, after just hours of this technological revolution by Facebook, reactions from all over the world hovered the news. Capitol Hill asked the social media giant to defend its project about the privacy concerns of the consumers. G-7 stated that it poses “serious” legal risks. Whereas, the Ministre de l'Économie et des Finances (French Ministry of Economy and Finance) released in a press statement that Diem would be a threat to the EU economy. While receiving a severe backlash from the G-7, Facebook still managed to stay in the limelight as the project has also been praised by many veteran economists like Mark Carney (Former Governor of the Bank of Canada and the Bank of England) who commented on the launch of the Diem project:

“There is a need to keep an "open mind" about new technology for money transfers, but anything that works in this world will become instantly systemic and will have to be subject to the highest standards of regulation.”

Novi working as an independent wallet for Diem will also integrate other services of the same group like WhatsApp and Facebook Messenger, making it possible for billions of people to share money to any country with only one click. Mark Zuckerberg and D.A Marcus (In charge Diem project) hope to make Diem decentralized in the future. Unlike other cryptocurrencies, Diem would start as a centralized currency and will be decentralized in 2025. Until then big names in the tech industry like UBER, SPOTIFY, VODAFONE, and other corporate giants will manage the development of its digital currency and network.

Facebook plans to transfer the control of the Diem project to the Diem association (comprising of 27 members) after its decentralization, making it a non-profit organization comprised of global companies, academic institutions, and social companies. To have the name on the foundation stone any organization would have to stake $10 million and run a validator node (a program that approves and validate transactions), the same job as a miner does in the mining of a Bitcoin. Participants would also have to pass a scalability bar to make it on the premium list of founding members. Whereas, the scalability conditions vary for the type of organization trying to ink their name on the list. In essence, Diem would allow the transfer of funds for billions of banked and unbanked folks at just one tap!

Pakistan despite having more than 40 million Facebook subscribers has still not been able to solve the monetization concern with the social media giant raised by the KP assembly last year. The unanimous resolution demanded the federal government to raise the monetization problem with Facebook so that the youth can earn through the silicon valley giant. Considering that, Pakistan is still deprived of a basic facility that is been given to 38 countries by the same company, it raises the question:

“Will Facebook even give it a thought to introduce its digital currency in Pakistan in the future?”

However, the State Bank of Pakistan has not labeled any cryptocurrency illegal or banned it. But it has also not officially authorized any entity or organization for the exchange or purchase and investment in digital currencies. Raza Baqir (Governor State Bank of Pakistan) when asked about the current situation of digital currency in the country by the international media outlet CNN said:

“We are studying it (introduction of a digital currency by the central bank) very carefully”

Alas, Pakistan has to go a long way to enter the digital era of revolution but it must recognize the importance of digital currencies swiftly. The Governor of the Bank of England highlighted the importance of new technologies for money transfers in the future. It is high time that Pakistan must act accordingly and shape its upcoming economical and financial policies friendly to the new digital currencies. As it will surely enable Pakistan to participate in the race of the first world and technologically advanced countries.