Libra without Facebook: How Celo boosts financial inclusion

Thanks to Facebook-based Libra project, “stablecoins”, the latest craze in the cryptocurrency space, have attained great interest from the financial sector in recent months, spurring major central banks worldwide to offer the digital cash of tomorrow.

While the Libra initiative has been struggling under mounting pressure from regulators, Celo, an open-source blockchain platform, has been launched to bring stable payments and remittances to the unbanked, arguably the same goal of Libra, with a US$36 million war chest from heavyweight backers like Andreesen Horowitz (a16z) and Polychain Capital.

“With blockchain technology to be offered to the masses, this really helps achieve our mission of financial inclusion,” said Evan Kereiakes, head of Asia Ecosystem Growth at cLabs, the team behind Celo project, “This is something that blockchains haven’t really achieved yet.”

They are offering a way for developers to build decentralized mobile apps that are based on Celo’s blockchain platform and USD-pegged stablecoin, Celo Dollar.

Celo’s network differentiates itself from other blockchains with its mobile-first solution.

To exchange cryptocurrencies today, a receiver has to download a wallet, generate a public/private key pair, and then share the long hexadecimal address with the sender. Celo simplifies this by allowing people to send payments to each other with only a phone number, instead of complicated addresses.

“We have made optimizations on the protocol so that it maps phone numbers to wallets, with the private key encrypted and stored on the phone,” said Kereiakes, “there is no middleman, no bank, and that is a powerful advantage to give people this level of financial security on their phone, in a way that is user friendly.”

Leveraging its mobile-first approach to bring people to the world of blockchain technology and crypto, Celo is backed by heavyweight investors and partners, including Andreesen Horowitz, Coinbase, Anchorage, Bison Trails, and Mercy Corps, which are also Libra Association members. They joined Celo’s Alliance For Prosperity, the non-profit foundation which contributes to and back the development efforts of the project.

Unlike bitcoin (BTC) and other cryptocurrencies, stablecoins are pegged to a real-world asset with set prices, such as other currencies, barrels of oil, etc., to help combat the problem of price volatility.

Celo offers a stablecoin called “Celo Dollar”, which is designed to keep its peg to the US dollar, and a governance token called “Celo Gold”. Celo is not trying to replace the US dollar with its own synthetic currency, a major concern from regulators on Libra’s token and its fiat currency-backed reserve. In a different collateral mechanism, Celo’s first stablecoin, Celo Dollar, is backed with “Celo Gold” and other cryptocurrencies, including bitcoin and ether, rather than fiat cash.

While to some regulators and central banks, the Facebook-backed digital currency Libra can be a danger to the world financial system, Kereiakes emphasized they are working hard to make sure that the project is compliant with regulations, “so that perhaps governments could have more control over a particular currency that is issued on the Celo blockchain network.”

“We see ourselves as complimentary in the current central banking and global financial system… we see that there are a number of use cases that we could improve upon.” Kereiakes told EJ Insight that through bringing “essentially a full-custody mobile banking solution” to anyone with a phone, one major use case would be enabling faster and affordable remittances.

With the promise of much lower transaction fees than traditional middlemen charge, Celo’s use cases can extend beyond peer-to-peer payments, into direct aid distribution and other financial services like lending.

“Direct giving is a use case really relevant right now in the age of COVID-19,” said Kereiakes, as governments and NGOs are launching various assistance programs, which can take weeks or even months for the aid to actually reach the population. “We are working to launch some pilots and campaigns [around this use case.]”

There are over 300 teams of developers currently building on Celo. The first of the decentralized apps on the platform, the Celo Wallet, is already available for iOS and Android.

Targeting the unbanked population, Celo sets its sights on emerging markets, like the Philippines in Asia, as it has already been building the local ecosystem around its launch, according to Kereiakes, who is focused on building Celo’s platform within Asia.

Asked about Celo’s prospect in the mainland China market, Kereiakes said there are a number of institutions contributing to Celo already, such as crypto venture capital fund Dragonfly Capital, and China-based technology firms like HashQuark and Stake.Fish.

However, Kereiakes believes Celo’s blockchain platform and its stablecoins are unlikely to be available in China, even though the nation is a “very friendly place for blockchain development.”

Last October, Chinese President Xi Jinping gave a speech saying China needs to seize the opportunities presented by blockchain, in what appeared to be one of the first instances of a major world leader backing the technology, as the nation’s central bank People’s Bank of China is looking to launch its digital currency electronic payment (DCEP).

“I think right now for private sector solutions, China is not really an option for adoption,” said Kereiakes.

DCEP, China’s official central bank digital currency, is already in the advanced testing phase in four cities, namely Shenzhen, Xiong’an, Chengdu, and Suzhou, which is available to retail users.

With China kicking off the race among central banks to roll out a sovereign digital currency, Kereiakes expects there will be more digital currency rollouts in the Western world. “A lot of other central banks probably feel the need to move in that direction sooner rather than later,” he said, “otherwise, they will find that their own domestic currency is perhaps less efficient, less usable, less secure than, say, a new blockchain powered central bank digital currency.”

ejinsight.com

Libra without Facebook: How Celo boosts financial inclusion
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