What Facebucks can do for the global poor

The central way that Libra wants to help the bottom billion is by providing cheap or free money transfers, something the world’s aid groups, treasuries, central banks, and development economists all believe is an urgent goal. Remittances—when one person sends money to a person in another country, stereotypically meaning an immigrant sending money home—are an unheralded but powerful economic force. They total half a trillion dollars a year, with two-thirds of that money heading to the developing world. Already remittances are three times as large as official development aid.

But they are expensive and sometimes difficult to send, limiting their scope. Money going from, say, Toronto to a small town outside Conakry, Guinea, needs to pass through an invisible network of financial institutions, all regulated by any number of national and international bodies. That costs money. According to the World Bank, remittance processors charge a 7 percent margin, on average. Cutting remittance prices by five percentage points would save nearly $20 billion year, meaning $20 billion more for recipients.

Cryptocurrencies, like the one Facebook and its partners are building, could send this number to zero. There would be no series of global banking institutions thirsting for a cut. There would be no need for the sender or recipient to go to a brick-and-mortar bank or Western Union.