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As the UN General Assembly gathers in New York for the 74th session of world leaders, a key question for the 2030 Agenda for Sustainable Development is how the world will achieve the ambitious Sustainable Development Goals (SDGs), enshrined in 17 key goals and more than 100 targets. What is required, despite growing reversion from multilateral collaboration, is the formation of uncommon coalitions that marshal organizational will, new thinking and collective investments to make material progress on the SDGs. In short, we need action. The Libra Association’s* commitment to building an open, modern, and secure payment system that can financially empower billions of people is precisely such an effort.
While it has been a little over 90 days since the announcement of the Libra project, our commitment that responsible financial innovation and strong adherence to financial and regulatory oversight are not in contest and has been redoubled. Similarly, the opportunity to make material progress on financial inclusion at the heart of the Libra project strikes a similar balance wherein financial inclusion and the integrity of the financial system can also be advanced. By reducing the barriers to entry to the basic building blocks of finance, what I call the 4S’ of money—sending, spending, saving, and securing—the Libra project drives material progress on insidiously high rates of financial exclusion.
A world with 1.7 billion people on the margins of basic banking and payment services and nearly an equal number who are underbanked, is not only a deeply unequal world, it is also a breeding ground for hopelessness. This in turn can lead to criminality and subject the poor to a range of social ills. Indeed, at the heart of the Libra project is the ability to create broad competition that reduces the costs and “bankability” of serving billions of people with a low-friction, low-cost yet high-security payment system powered by the Libra blockchain. This modern payment system in turn will enable a wide range of new solutions and lower cost payment services, as opposed to traditional payment systems that currently levy the heaviest prices on those who can least afford it. The world is largely disconnected, opaque, and analog payment networks are not only cost-prohibitive when it comes to serving the unbanked and underbanked, they cannot realistically extend the perimeter of payments to reach these communities while at the same time upholding prevailing norms on de-risking. This void is being filled by potentially risky and obscure alternatives.
Getting this combination right, which of course includes wider availability of digital identities that can help pull more than a billion people who have no reliable government-issued ID in from the shadows, will help spur a range of innovations. While the Libra Association’s goal of building financial infrastructure that can empower billions of people is broadly linked to all of the SDGs, our efforts can help spur material progress on: SDG 1, which calls for the eradication of poverty in all its forms; SDG 5, which focuses on gender equality and empowering women and girls who bear the heaviest brunt of financial exclusion and are more generally excluded from the financial system; SDG 8 on the promotion of sustained, inclusive and sustainable economic growth and productive employment; SDG 9 on building resilient infrastructure and fostering innovation that promotes inclusive and sustainable industrialization; SDG 10 specifically calling out the goal of reducing income inequality in countries and between them; SDG 16 on promoting peace and access to justice as well as the promotion of effective and accountable institutions; and, finally, SDG 17, which is all about catalyzing the cross-sector collaboration and uncommon coalitions necessary to help achieve the SDGs and the 2030 Agenda.
On these specific SDGs, the advent of an open payment network like the Libra blockchain defrays the operating costs and technological risks to the Libra Association and not to prospective developers. As an example, the cost of sending remittances, which are a more important cashflow than foreign direct investment, or official development assistance remains stubbornly high at 7% on average. Meanwhile the SDG target of reducing the cost of remittance transfers to 3% will remain elusive without improving competition or spurring large-scale digital transformation in the payment space. Similarly, on the score of pulling more people into the global economy and the economic freedom offered through entrepreneurship, the ability to connect global supply chains, create market access, and enable value creation to flow from supplier to buyer no matter how small the payment, can be enabled via the Libra project. The Libra project aims to be a public good supporting these and other types of innovations while protecting the institutions, oversight and norms that guard the global financial system.
About Dante Alighieri Disparte:
Dante Alighieri Disparte is the vice chairman and head of policy and communications for the Libra Association. He is the founder and chairman of Risk Cooperative and serves on the Federal Emergency Management Agency’s National Advisory Council.
*On December 1, 2020, the Libra Association was renamed to Diem Association.