Libra has been the focus of much criticism in recent months. The Facebook currency, it is argued, offers dubious data protection and harbors considerable risk for the world’s economy. However, those creating it remain convinced: Libra will arrive in 2020. Find out here what is really happening with this cryptocurrency.
It was the finance buzzword of 2019: Libra. No subject can have generated as much debate in the banking world as Facebook’s cryptocurrency. The social media giant gave fright to both the business world and politicians with its announcement of Libra. According to Facebook’s CEO Mark Zuckerberg, following a test phase its digital currency is to be introduced in the first half of 2020 and thus be made accessible to 2.4 billion potential users.
Swiss finance minister Ueli Maurer sees no prospects for Libra
In October, head of FINMA Mark Branson had been praising the creators of Libra for developing their cryptocurrency with the involvement of the public and the regulatory authorities. At the beginning of December 2019, Facebook expanded on the Geneva-based project with a second Libra company. The aim was to push forward more quickly with Libra. Then, just before Christmas, Swiss finance minister Ueli Maurer of all people issued his bombshell: “Switzerland cannot approve Libra in its present form.” Prior to that, key strategic partners, including Paypal, Mastercard and Visa, had announced they were withdrawing from the project. What had happened?
Potential risks to the world’s economy
Right from the outset when the Libra project was announced, the Facebook currency was a thorn in the side for European data protection people: the technology would enable Facebook to track a user’s every step and every transaction and possibly to block transactions as it saw fit. This would allow people to be controlled to an unprecedented extent. Furthermore, the project might harbor major risks for the world’s economy. That is why major international organizations such as the European Union have prevented the project from being launched. Now the Swiss authorities have reacted too – Libra has no chance of being approved at the present time.
What is Libra?
Libra is intended to become a digital means of payment based on decentralized blockchain technology. It differs from previous cryptocurrencies in one respect: a reserve fund made up of various currencies is intended to prevent the huge price fluctuations experienced by Bitcoin, for example. Users can pay with Libra in shops at the till and in online shops. And they can use Facebook platforms (such as WhatsApp) to transfer money in seconds – without the intervention of banks, directly from user to user.
51,000 transactions in the test phase
However, there is also good news for the operators of Libra: in its test phase the Facebook currency notched up more than 51,000 transactions in the space of two months. Thees test transactions have no real value, which is why they are not subject to official oversight. Libra’s technical infrastructure has also been expanded and a new road map for 2020 has been launched. At present the teams are busy analyzing the test phase and putting improvements in place.
Digital currency from China
Even though the prospects do not look good for Libra at present, the project could yet be approved in 2020. The reason: the digital yuan. According to the experts, western governments will have no choice but to approve Libra. Otherwise China could gain a major advantage with its own virtual currency. And time is marching on: the test phase for the digital yuan starts at the beginning of 2020. This digital currency issued by the Chinese central bank could have a considerable influence on the world’s economy.
Challenges for the banking system
Whether the Facebook currency arrives or not – the banking system faces major challenges in 2020. The trend is quite clear: according to Swiss finance minister Mr. Maurer, in the future traditional banks will no longer be needed for certain transactions. “The current banking system will be shaken up once again,” Mr. Maurer predicted at his end-of-year media conference. Meanwhile, the next player has already announced its foray into traditional financial services: Google. In a project called Google Cache, the tech giant wants to offer free current accounts from 2020. For the traditional financial industry, the air will become very thin in the new year.
The key points in brief
Blick: «Libra» zum Schweizer Finanzwort des Jahres 2019 gekürt.
Finews: Was Mark Branson aus der Operation Matterhorn gelernt hat.
Inside IT: Zweite Genfer Firma für Libra gegründet.
Neue Zürcher Zeitung: Finanzminister Maurer: Libra derzeit ohne Chance auf eine Bewilligung.
Netzwoche: Das sind die Alternativen zu Libra.
CNBC: PayPal withdraws from Facebook’s libra cryptocurrency.
CNBC: Facebook’s libra cryptocurrency coalition is falling apart as eBay, Visa, Mastercard and Stripe jump ship.
Crypto News Flash: Facebook Libra präsentiert Roadmap für 2020.
Libra: Five months and growing strong: the Libra project.
Libra: Libra Core Roadmap #2.
South China Morning Post: China’s new digital currency ‘isn’t bitcoin and is not for speculation’.
T3N: Google will zur Bank werden.
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