If Facebook’s new cryptocurrency should resonate anywhere it should be India, where the social media giant has more than 300 million followers. Many Indians are shut out of banking and face punitive fees for simple transactions, like transferring money to their loved ones.

But in India as elsewhere, the social media giant’s ambitions to remake global finance through its Libra currency will have to overcome regulatory mistrust, plus the existence of popular homegrown rivals in the market for digital payments.

Some experts point out that Libra - a cryptocurrency whose value is pegged to be as stable as the dollar - is unlikely to pass muster with the banking regulator due to concerns around tax evasion, money laundering and fraud.

WhatsApp is separately attempting to build a payments business in India using the unified payments interface (UPI). However, it has not received approval to launch full-fledged commercial operations and has been running a pilot since early 2018.

Last month, the RBI informed the Supreme Court that WhatsApp cannot operate its in-chat money transfer feature WhatsApp Pay without its permission. WhatsApp said data servers were located outside India and the product was still in its trial phase and would only be finalised in July. The apex court is to further hear the matter in July.

Former Finance Minister Arun Jaitley had said the Indian government doesn’t consider cryptocurrencies as legal tender and will take all measures to eliminate payments using them.

The RBI has maintained that owing to “significant spurt in the valuation of many virtual currencies and rapid growth in initial coin offerings”, virtual currencies were not safe for use.

To access Libra on their smartphones, users will go through a virtual wallet called Calibra. There are plenty of such e-wallets already. Paytm and FreeCharge are popular in India.

What is the purpose of Libra?

Facebook is developing Libra from a base in Switzerland, in partnership with 27 other corporations - including MasterCard, Paypal, Uber and Vodafone - collectively known as the Libra Association.

Facebook says the mission for Libra is a simple global currency and financial infrastructure that empowers billions of people. Libra is made up of three parts that will work together to create a more inclusive financial system…

* It is built on a secure, scalable and reliable blockchain

* It is backed by a reserve of assets designed to give it intrinsic value

* It is governed by the independent Libra Association tasked with evolving the ecosystem.

Companies rooted in traditional finance such as Visa and MasterCard have joined from the start, betting that Facebook’s clout gives the project enough potential to overcome any downside to their existing business models.

There is clearly potential if Facebook makes good on its pledge to bring low-cost or free banking to the unbanked and open up areas such as money transfers, where the company - citing UN data - says migrants lose $25 billion every year in remittance fees.

The Philippines could be a fertile market, with Filipinos working overseas sending tens of billions of dollars every year through money transfer outlets.

What are the challenges ahead?

Facebook is banned outright in China, and the company admitted it would be unable to operate Libra anywhere that is subject to US sanctions, such as Iran. There is suspicion too on its home turf, with US lawmakers highlighting Facebook’s poor record in safeguarding user data. The Senate banking committee has scheduled a hearing for July 16.

Response from major countries

French Finance Minister Bruno Le Maire said digital money could never replace sovereign currencies. “It cannot and must not become a sovereign currency, with all attributes of a currency, such as the capacity to issue sovereign debt and serve as a reserve currency. The aspect of sovereignty must stay in the hands of states and not private companies which respond to private interests,” he said.

There need to be “guarantees” so that “this transaction instrument is not misused, for example, for the financing of terrorism or illicit activities”, he said.

With France currently holds the G7 presidency, Le Maire said he had asked the group’s central bank governors to prepare a report by mid-July to lay out the guarantees required from cryptocurrencies.

Bank of England governor Mark Carney said Libra would have to withstand the toughest scrutiny and not become a tool for money laundering or terrorist financing.

Facebook co-founder Chris Hughes said the companies involved in the Libra Association, which have each put $10 million into the project, would be able to “disrupt and weaken” nation states.

He warned that if enough people in emerging economies traded local currency for Libra, it would threaten the ability of governments to manage their fiscal policies. Emerging markets should place a temporary ban on local banks and payment processors accepting the currency until the implications are thought through, Hughes said.