Libra: The most pressing questions about Facebook's digital currency

When will Libra launch?

The official launch is scheduled for the first half of 2020 (Advertising week reported). But even Facebook managers now admit that many regulatory and legal issues still need to be clarified before then. The old Facebook motto "Move fast and break things" - be fast and break rules and established rules - will not lead to the goal here.

How can Libra be used?

As with other cryptocurrencies, you need a digital wallet. Facebook will launch its own wallet, "Calibra." It will function as a standalone app, but will also be integrated into WhatsApp and Facebook Messenger. Users will be able to buy Libra with classic currencies such as dollars, euros or yen at authorized exchanges - and also sell it.

What benefit do users get from using Libra in the first place?

In the first phase, Libra is aimed primarily at people who want to transfer money across national borders and have been paying horrendous fees for this in the traditional financial system up to now. Another application scenario is the quick transfer of money between friends, for example when splitting a restaurant bill.

Is Libra even a "Facebook currency"?

Facebook has pushed the concept and financed the first phase of development work. However, Libra will be the responsibility of its own consortium, the Libra Association. The association is made up of 28 companies from the tech and financial sectors, including Uber, Paypal, Visa, Mastercard, Vodafone and Spotify. But it also includes nonprofit companies such as Kiva. The organization from the USA organizes the granting of microloans in developing countries.

Will Libra give Facebook insight into financial transactions?

Facebook does indeed notice when money is transferred via Calibra, WhatsApp or Messenger. However, the network promises to keep its users' financial information separate and not to use it for targeted advertising.

And you expect Facebook to believe that?

In fact, there are public doubts about the statement. For example, the German government's data protection commissioner, Ulrich Kelber, warned against Libra. "A corporation that has such huge amounts of data at its disposal should not still have details of our payment behavior," Kelber said to the Cologne city anneziger. Facebook had promised not to combine the transaction data with other data. But: "If we are dependent on Facebook's goodwill, I would advise against relying on it," said Kelber. Even when Facebook and Whatsapp were merged, the company had not kept its promises.

And what do the traditional banks think?

So far, the big banks have held back on making public statements. But there are also financial experts who are already speaking plainly and massively criticizing the push for a digital world currency: "Of course, Facebook has another intention," says Robert Halver of Baader Bank. "If you get data from billions of customers on how they travel on the Internet, what they spend money on, take out loans and so on, then the data octopus we have so far is just a little cuddly animal."

What do Europe's monetary guardians think of so-called cryptocurrencies?

Central bankers already had a clear opinion on the Bitcoin hype: such crypto-tokens are not a real currency, as they lack the control of a central bank or a state, said ECB President Mario Draghi. However, the blockchain technology behind them is "quite promising" because it allows bills to be paid automatically as soon as they are received. Several central banks are experimenting with blockchain - including the Deutsche Bundesbank.

And what does the influential Financial Stablity Board FSB think?

The Financial Stability Board says broader use of new types of crypto assets for retail payments would require close scrutiny by authorities to ensure they are subject to high regulatory standards. "The FSB and standards bodies will monitor risks in a very close and coordinated manner and consider additional multilateral measures as needed." The FSB statement likely put an end to Facebook's hopes that Libra would only be gently regulated.

What makes Libra different from the cryptocurrency Bitcoin?

Bitcoin and Libra differ centrally in several respects. First, Libra is pegged to a basket of established currencies such as the U.S. dollar, euro and yen and hedged by short-term government bonds. This avoids massive price fluctuations like Bitcoin ("stable coin"). Libra also does not use blockchain in the strict sense, but another system of distributed ledgers, a "distributed ledger technology." Libra thus consumes only a fraction of the energy that has to be expended in "mining" Bitcoins.

If Libra will be comparatively stable, why does the Bundesbank criticize the concept anyway?

Bundesbank President Jens Weidmann believes that even cryptocurrencies that are less susceptible to fluctuation pose a risk to consumers: "In particular, there is the question of how the value of stable coins can be guaranteed." If stable coins were to be used on a large scale, they could undermine deposit-taking and the business model of traditional banks, Weidmann warns. That, in turn, could disrupt their payments business and financial market processes.

Can Libra be abused by criminals?

Yes, at least Bundesbank board member Joachim Wuermeling sees this danger: "For example, such platforms must not become a new marketplace to conduct money laundering or terrorist financing," Wuermeling warned in an interview with the Frankfurter Allgemeine Sonntagszeitung FAS. According to Bafin President Felix Hufeld, politicians, supervisors and central banks would be challenged in a wide range of areas - from monetary policy to money laundering - should Libra become established. The fundamental question is: "How can we guarantee the state's ability to control the digital world?

Does Libra's importance extend beyond the financial world?

Yes, that is quite possible. For example, there are two short sentences in the whitepaper that indicate that the project's ambitions go even further than bringing billions of people into the global financial system. "Another goal of the (Libra) Association is to develop and promote an open identity standard. We believe that a decentralized and portable digital identity is a prerequisite for financial inclusion and competition." With 2.4 billion users worldwide, Facebook could succeed where others have failed in introducing a globally accepted digital ID. (SDA/swi)