Libra (internet currency)

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Libra
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Publishing year 2020
Website libra.org

Libra (previously known under the speculative name FacebookCoin ) is a private complementary currency planned by Facebook Inc. and scheduled to hit the market in 2020. The digital currency is said to be operated by an organization established for this purpose called the Libra Association . Users buy Libra with their local currency. The funds thus collected are 100% invested in a currency basket by the Libra Association as securely as possible and with the aim of reducing the Libra's exchange rate fluctuations . The return achieved with this investment will benefit the Libra Association and will be used in addition to the profit intention for the technical operation of the currency. Similar to sight deposits or cash, no interest is paid on deposits in Libra , but it is to be expected that international transactions in particular can be processed faster and cheaper in Libra than in conventional cashless payments . Facebook Inc. Promotes Libra as a Solution for People in Emerging Markets Without Access to Banking ; however, Libra deposits require the remitter to have a bank account . Facebook Inc. first publicly presented its plans on June 18, 2019.

The Libra Association is headquartered in Geneva . The 28 founding members of the Libra Association include Facebook Inc., Spotify , Lyft , Uber , Coinbase and Kiva . PayPal , Visa , eBay , Mastercard and Stripe announced in October 2019 that they would be leaving the supervisory board of Facebook's cryptocurrency project. Vodafone followed suit in January 2020. However, cooperation in the future has not been ruled out.

In January 2020 it became public that Facebook plans to forego the planned “mixed” currency basket of dollars, euros, pounds, yen and Singapore dollars, with which Libra should be supported. Instead, Libra should only be linked to one currency at a time.

technology

Although Libra technically uses blockchain technologies, it is not an independent and distributed cryptocurrency . The blockchain connected to Libra should only be accessible to members of the Libra Association and possibly supervisory authorities. In order to reach consensus on block generation, processes with the proof-of-stake concept could be used in contrast to computationally intensive proof-of-work methods of independent cryptocurrencies. Obviously, the Libra Association will control the monetary policy of the currency in the sense of a stablecoin , in contrast to the mining process e.g. B. Bitcoin.

Beyond the currency, Libra is an open source, distributed system for creating, managing and executing decentralized programs or contracts ( smart contracts ) in a Libra blockchain . As with the distributed Ethereum system, it represents an alternative to the classic client-server architecture . In contrast to Bitcoin , Libra is both a currency and a platform for smart contracts. A wide range of applications are conceivable for this: If you buy a ticket for a train or a ticket for a flight, insurance for reimbursement in the event of a delay can be linked to this. The smart contract checks and transfers reimbursements automatically in the event of delay. All participants use data together in the form of a steadily growing blockchain. You need a client program that synchronizes with the network.

Smart contracts

Smart contracts are programs that are automatically executed as soon as a sum agreed in the contract has been transferred. A manual check of the incoming payment is not required. Smart contracts for Libra are written in the specially developed programming language Move and executed on a virtual machine ; this serves the purpose of decoupling the users' clients from the host environment, i.e. other applications on a computer.

A transaction costs Libra Coins. Users, more precisely their wallets, indicate the maximum price they want to pay for it.

Decentralized apps (Dapps)

Dapps are programs that are executed in parallel on the Libra blockchain and thus on all node computers. For example, while classic websites are connected to a central server and possibly databases via API , a Dapp is connected to the blockchain via a smart contract. This is more expensive and slower than in the client-server model - but tamper-proof. Since the integrity of the blockchain is checked continuously and decentrally, decentralized apps are fault-tolerant and very robust.

KYC process and wallet

The Libra will not be anonymous. The wallet application developed by the Facebook subsidiary Novi should contain a know-your-customer process (KYC). Before using the wallet, you must identify yourself with an official ID. This means that Libra users are transparent, each transaction can be assigned to the people involved.

Responsibilities and rights of member companies of the Libra Association

The centralized Libra network is only open to member companies of the Libra Association . These are granted access for an admission fee of ten million dollars. The aim is for at least one hundred companies to determine the fortunes of the Libra and check all transactions when it starts.

Legal issues and regulation

It is not clear to what extent Libra would be a bank in the legal sense and which banking supervisory authority would be responsible for regulating it. The Federal Reserve System and the US federal government insist on state regulation. The French minister Bruno Le Maire called on the central bank chiefs of the G7 countries to report on the Facebook plans and warned on the radio station Europe 1 that Libra should not be allowed to become an independent currency, as Libra would do a lot of money laundering and Terrorist financing would be made possible. Also Markus Ferber , Member of the European Parliament, warned that Facebook unregulated with the introduction of Libra shadow banking can be. The EU competition authorities are examining whether Libra could constitute a violation of competition rules and whether competitors would be locked out inappropriately.

Finance Watch called Libra a "great risk to public financial sovereignty" and a bad idea - for its users, for the stability of the financial system and, last but not least, for democracy.

Because the Libra Association is based in Switzerland, Swiss financial market law comes into play. The Swiss Financial Market Supervisory Authority (FINMA) announced in July 2019 that it wanted to examine the project. From the perspective of Swiss financial market regulation, the characterization of the Libra tokens is particularly important. Depending on the holder, the tokens have different legal content. It supplies a value right to the token resellers predefined by the Libra Association and specifically authorized. If, on the other hand, end users hold the token, it functions solely as a pure FINMA payment token.

The CDU MEP Stefan Berger sees Libra's power potential as a threat to the economic stability of the euro area and its democracies: Libra could turn Facebook into the central bank. Berger advocates the development of a European stablecoin in order to be able to offer a safe alternative to the Facebook currency. He called for the European Union to "collect expert knowledge and carry out a detailed impact assessment for the financial system". Franz von Weizsäcker, head of the blockchain lab of the German Society for International Cooperation , welcomes the Libra initiative as the trigger for a long overdue debate on the creation of an open global payment infrastructure that clearly leads to financial inclusion and the achievement of the goals for sustainable development could contribute.

Risks and benefits for users

Libras owners run a number of risks:

  • Exchange rate risk : Similar to Special Drawing Rights , the Libra's value protection is based on a basket of currencies. Accordingly, the holder of the Libra has an exchange rate risk that is greater, the lower the weighting of his home currency in the currency basket of the Libra. Is z. If, for example, the share of the euro in the currency basket is 30%, the investor in Libra from the euro area actually acquires 30% euro and 70% foreign currency. In the event of an economic or currency crisis, the consortium reserves the right to adjust the currency basket. This causes further exchange rate risks.
  • No direct claim to payment in established currencies: Instead, there is currency trading between Libra and other currencies. Due to the coverage by currency reserves, the rate should level off according to the value of the currency rate. This presupposes the trust of the market in the intrinsic value. If this confidence is lost, other market prices for Libra would result.
  • Liquidity risk : The reserves are not held in cash or sight deposits, but in fixed-income bonds. In the case of a bank run , if many investors want to get out of the Libra at the same time and the reserve is to be used for this purpose, it is not immediately liquid and the sale is associated with a loss in value.

The construction of Libra as an interest-free international currency - similar to sight deposits in national currency - is clearly aimed at the payment function of money and not at the store of value. Whether users will tend to the new currency despite the risks depends on the expected costs for transactions in Libra and their speed, e.g. B. in international payment transactions. In contrast to credit card companies , conventional bank accounts or cash transfers with Western Union , Libra could offer users fast, free transactions between all participants because the reserve stock is supposed to generate interest income to cover costs. The costs of currently negative key interest rates for the yen and euro could be offset in the currency basket. If users only have small amounts in their electronic wallet , as is the case with cash , the risks mentioned above are not very significant.

criticism

  • Data protection: The user data of the companies participating in the Libra Association could be linked to the shopping habits and financial transactions of users in all areas of life in which Libra is used.
  • Currency policy power shifts are feared as a result of Libra. Politicians from the Republican and Democratic parties in the United States around Maxine Waters (member of the finance committee of the US House of Representatives) and US Senator Sherrod Brown ( ranking member of the US Senate Banking Committee) are calling for the introduction of Libra to be postponed. Before 2.4 billion Facebook users could gain access to Libra Coins, a detailed assessment of the associated risks for the already fragile financial system would be required. Complementary currencies that can be used around the world could act as a fluctuation-resistant alternative that could withdraw central banks' financial sovereignty over national currencies.
  • Economic dominance of the market: Founding members of the Libra Foundation such as Facebook, PayPal, Visa and Mastercard , Coinbase, Xapo , eBay , Uber and Spotify already occupy an almost completely dominant position in their fields of business. Coordinated in the network, this dominance of the market would be strengthened significantly.

literature

Individual evidence

  1. ↑ Usman W. Chohan: Social Media Monopolies and Cryptocurrencies: Facebook's Proposed Coin. (PDF) In: Social Science Research Network . March 12, 2019, accessed June 19, 2019 .
  2. ↑ Jürgen Geuter: Libra presented: How Facebook is expanding its power with its own crypto currency . In: Spiegel Online . June 18, 2019 ( spiegel.de [accessed June 18, 2019]).
  3. ↑ Facebook's cryptocurrency partners revealed — we obtained the entire list of inaugural backers. In: The Block. June 14, 2019, Retrieved June 18, 2019 (American English).
  4. ↑ ZEIT ONLINE: Libra: Facebook promises digital currency without fluctuations in exchange rates . In: The time . June 18, 2019, ISSN  0044-2070 ( zeit.de [accessed June 18, 2019]).
  5. ↑ https://libra.org/de-DE/white-paper/ Libra Whitepaper
  6. ↑ FOCUS Online: Facebook creates new world currency: Will we all soon pay in Libra? Retrieved June 18, 2019 .
  7. ^ Daniel Eckert: Facebook money: Libra can also be sent via WhatsApp . June 18, 2019 ( welt.de [accessed June 18, 2019]).
  8. ^ The Libra Association - Nonprofit Organization | Libra. Retrieved June 18, 2019 (German).
  9. ^ Why We're Joining the Libra Association. June 18, 2019, Retrieved June 18, 2019 (American English).
  10. ↑ heise online: Paypal is turning its back on Facebook's Libra project. Retrieved October 5, 2019 .
  11. ↑ tagesschau.de: Libra loses more partners. Retrieved October 11, 2019 .
  12. ↑ t3c.de: Vodafone is also getting out of digital currency Libra. Retrieved January 23, 2020 .
  13. ↑ Lauren Feiner: Facebook's libra cryptocurrency coalition is falling apart as eBay, Visa, Mastercard and Stripe jump ship. October 11, 2019, accessed October 14, 2019 .
  14. ↑ Facebook cryptocurrency: Libra is considering doing without a currency basket. In: FinanceFWD. January 27, 2020, accessed January 27, 2020 .
  15. ↑ Jan Lansky: Possible State Approaches to Cryptocurrencies . In: Journal of Systems Integration . tape 9 , no. 1 , January 31, 2018, p. 19–31 , doi : 10.20470 / jsi.v9i1.335 ( si-journal.org [accessed June 20, 2019]).
  16. ↑ a b Facebook's Zuckerbucks: It could have been worse. Retrieved June 18, 2019 .
  17. ↑ Mirko Dölle: Unequal Brothers. How much bitcoin is in Facebook's Libra. c't 16 of July 20, 2019, p. 41.
  18. ↑ Mirko Dölle: Unequal Brothers. How much bitcoin is in Facebook's Libra. c't 16 of July 20, 2019, p. 40f.
  19. ↑ Trump against Facebook's "Libra" "The only true currency is the dollar" - ARD.de
  20. ^ France Calls for Central Bank Review of Facebook Token , Bloomberg News . June 18, 2019. Retrieved August 30, 2019. 
  21. ↑ EU checks Facebook's cryptocurrency - boerse.ard.de
  22. ↑ Pablo Grandjean: Don't let Facebook take over the financial system ( en-EN ) August 14, 2019. Accessed August 30, 2019.
  23. ↑ Christian M. Müller step: Libra: Heads I win - tails you lose . July 22, 2019.
  24. ↑ Martin Lanz: Facebook's Libra wants to be supervised by the Swiss Finma | NZZ . July 16, 2019, ISSN  0376-6829 ( nzz.ch [accessed on September 6, 2019]).
  25. ^ Libra, the global financial system and Switzerland. In: Avenir Suisse. Retrieved on September 6, 2019 (Swiss Standard German).
  26. ^ David Schechtman: Necessidade de registro de ICO: tokens são valores mobiliários? (Necessity of ICO Registration: Are Tokens Securities?) . In: SSRN Electronic Journal . 2018, ISSN  1556-5068 , doi : 10.2139 / ssrn.3203911 .
  27. ↑ FOCUS Online: Have to be quick: CDU MEP plans digital euro. Retrieved September 27, 2019 .
  28. ↑ Do we need a digital euro? Retrieved October 24, 2019 .
  29. ^ Franz von Weizsäcker: Libra vs. Governments: The Race for an Open Global Payments Infrastructure. In: netzpolitik.org. October 18, 2019, accessed October 20, 2019 .
  30. ↑ - Mayer's world economy: Better Libra than Euro. July 7, 2019, accessed July 8, 2019 .
  31. ↑ ZEIT online: Cryptocurrency: Pay once with Libra, please! https://www.zeit.de/digital/internet/2019-06/kryptowaehrung-libra-facebook-bitcoin-blockchain#gelangt-facebook-ditzt-an-noch-mehr-daten Retrieved on September 5, 2019.
  32. ↑ Pete Schroeder: Waters leads a chorus of caution about Facebook cryptocurrency. Retrieved June 19, 2019 .
  33. ↑ Facebook's “crypto currency managed from a Swiss bank account” in the sights of American politics
  34. ↑ www.brown.senate.gov: Financial Watchdogs Must Scrutinize Facebook Cryptocurrency Closely