You can trust Facebook's Libra crypto currency
Facebook's Libra makes cryptocurrencies suitable for the masses - even without banks
More than 2.4 billion potential users for Facebook's crypto currency Libra: After revolutionizing private and public communication, will Facebook also succeed in revolutionizing the global monetary system? According to Hartmut Giesen, who is responsible for digital business models and business development in the fintech sector at Sutor Bank in Hamburg, the Coin Libra planned for 2020 and presented in detail on June 18 will make cryptocurrencies suitable for the masses in the future. "The Facebook Libra project is groundbreaking in terms of size, aspiration and probability of success and can enormously accelerate the spread of crypto currencies," explains Hartmut Giesen. Interesting: The consortium formed by Facebook includes important players in the global financial system, but no banks.
Crypto token with a stable reference value
With the Libra token, users of the Facebook platforms - in addition to Facebook itself, WhatsApp and Instagram - should be able to send each other payments. Like other large cryptocurrencies, the currency is based on blockchain technology, but is linked to real, stable (“stable”) currency values - hence the name “stablecoin”. According to the published white paper, the reference value of the Libra is not a single currency like the US dollar, but a basket of different currencies. “A token linked to stable references is the key for the broad application of blockchain-based payments in various contexts such as trade, logistics or industry - in other words, where they should enable machine-to-machine payments, for example. Because both people and companies cannot do anything with means of payment whose value fluctuates strongly - as is the case with Bitcoin, for example - "explains Hartmut Giesen.
Three years ago, Sutor Bank itself, together with an eMobility platform and a Berlin startup, developed one of the first stablecoins with which electric car owners could pay for electricity at private charging stations.
Strong consortium makes mass claims clear - but no banks involved
The Libra is the first approach of a globally active platform to create a crypto currency with global mass appeal together with a number of other strong partners with a mass customer business. The partners also include companies that are directly attacking the Facebook project, such as Visa, Mastercard or Paypal. The involvement of established and far-reaching partners should be beneficial for user acceptance: "In order to scale stablecoins worldwide, the operators must firstly have the means to store the value of the coins in circulation with the 'real' reference values, and secondly, the trust of the Users enjoy. The consortium formed by Facebook has both, ”explains Hartmut Giesen.
It is interesting that the Facebook consortium includes important players in the global financial system, but not banks. "That could have something to do with the fact that the entire Libra setup" hurts "them the most, but also with the fact that they shy away from the regulatory complications that can arise from membership in the consortium," analyzes Hartmut Giesen.
Global infrastructure, means of financial inclusion
The worldwide penetration of Facebook, WhatsApp and Instagram in connection with the future integrated wallet called Calibra makes the Libra immediately available and acceptable to billions of people in one fell swoop, at least in theory. The new currency is also intended to serve as a means of financial inclusion: in many developing countries, more people have a Facebook account than a bank account. In addition, the population is exposed to the capers of their currencies. “For the first time, Facebook can give many people access to a stable payment system including a stable currency. For these users in particular, the transfer of money from abroad, where they emigrate to earn money, to their families also plays a major role, ”says Hartmut Giesen. The Libra could therefore drastically simplify cross-border payments on a large scale and make them cheaper.
Obstacles: regulatory law, government resistance, data usage
However, there are still some hurdles to overcome when it comes to implementation. These include, in particular, questions of supervisory law: How must users be identified, which anti-money laundering obligations must be complied with, which tax regulations apply, is the token to be regarded as a payment instrument or a security token, which in turn entails different regulatory requirements. In addition, there could be strong legal resistance in some states to prevent widespread capital flight into the Libra: “Especially the states for whose citizens the Libra could be most interesting - for example in inflation-plagued Turkey - are likely to have the least interest in that an easily accessible parallel currency is created that cannot be influenced by state monetary policy, ”explains Hartmut Giesen.
According to Hartmut Giesen, one of the biggest hurdles to Libra's success is Facebook itself: “There is little doubt that Facebook can technically set up the Libra system. But when it comes to data usage, Facebook is already facing a great deal of mistrust. ”The connection of the data already circulating on the platforms with the global payment data then available creates great fears about what Facebook will do with the knowledge that arises from the networking of the data , will probably start - even if the whitepaper expressly emphasizes that financial and personal data are kept separate from each other.
Last but not least, the Facebook concept contradicts what the crypto community actually wanted to achieve with the invention of Bitcoin: an open, decentralized payment system. "With Libra you will now have a multicentral currency network in the hands of a consortium of commercial private companies," says Hartmut Giesen.
Conclusion: The outlines of the blockchain revolution are becoming visible
In Hartmut Giesen's opinion, there will be a number of side effects in the course of the Libra launch, regardless of whether Libra is a success or not. "In the medium term, billions of people will come into contact with cryptocurrencies for the first time and see that they are not mysterious, high-risk payment methods from the dark shallows of the Internet," says Giesen. It is therefore to be expected that after a reasonable learning curve time, many people will also be able to access the "original", the Bitcoin. In addition, Libra could act as a blueprint for the development of a large number of other stablecoins for other use cases. The general regulation of cryptocurrencies should also benefit from the Facebook project, as states would have to quickly create regulatory clarity simply because of the high prevalence of the Libra token.
Overall, Facebook's Libra shows the outlines of the previously only prophesied blockchain revolution in banking: "For the first time, the real possibility appears that a bank- and state-independent payment system will emerge, even if it is not really decentralized and independent," explains Hartmut Giesen.
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