| In June 2019,Facebook announced the most ambitious project to transform the global financial system by devising a virtual cryptocurrency – Libra.Billions of people in emerging economies,who have no access to banking,are the target segment of this project.In theory,they will be empowered with Facebook’s financial services.However,the Central Bank’s sovereignty of many countries will be jeopardized.Currently,Bolivia has one of the highest shadow economies in the world,more than 80% of the population are in the informal business.The Boliviano is the only currency used in the country and its payments methods are;cash;debit and credit card;electronic transfers;and checks.The Central Bank of Bolivia(BCB)has the control of the monetary and economic policies.No fintech company is operating yet in Bolivia and most of the people still use cash as the main payment method.Therefore,Libra could disrupt completely the Bolivian economy with its Techfin ecosystem.Based on the situation that Bolivia must deal with Libra’s threat,the paper started with PEST analysis and evaluated all its factors in two dimensions: impact and uncertainty.Then,three three possible scenarios were drawn up: Bolivia increases the regulations and forbids financial institutions to engage with Libra’s ecosystem:Libra enters the Bolivian economy and the BCB has a virtual competitor that can monopolize the online banking and internet finance;The BCB creates a Central Bank Digital Currency(CBDC)to empower the population without banking and financial services and simultaneously bans Libra use in the country.Sooner or later,Facebook shall try to enter the Bolivian economy with its techfin services.Consequently,two contingency Strategies were proposed to counter the threat: banning the operation of Libra in Bolivia,however,technology and regulatory challenges should be faced;and the BCB devises a CBDC – which is a mandatory roadmap for the Central Banks in this decade. |
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