WhatsApp Money From 2020: Four Questions And Answers About The Facebook Currency Libra

2023 Author: Sheila Hailey | [email protected]. Last modified: 2023-08-25 04:29

In a 12-page PDF on the Libra Association website, Facebook explains what the new currency is all about - albeit in English and in plenty of abstract terms. But what everyone should already know by now: What is coming up can be compared to the hype surrounding the cryptocurrency Bitcoin - only that this time a different approach was chosen and well-known partners were on board from the start. Libra has huge potential and could revolutionize digital payments.

1. What is Libra?

Facebook itself speaks of a "global currency and financial infrastructure". A look at the cryptocurrency Bitcoin helps to understand. Both currencies are created by a highly complicated calculation program (Libra Blockchain, PDF), there are no real coins or notes with these digital currencies. Libra will also use a digital wallet called "Calibra". While the Bitcoin price is subject to strong fluctuations, the "GlobalCoin" Libra will be linked to classic currencies such as the euro, yen or dollar. This should ensure reliable exchange rates - very important if you want to exchange your Libra credit for euros. Libra is scheduled to start in the first half of 2020 - but there are still a few legal issues to be resolved by then. The planned "Facebook currency" is already attracting numerous critics.

Here's Libra's introductory video:

2. What can you do with Libra?

With Libra, for example, you will transfer money across national borders - with the advantage that there are no expensive fees. Another purpose is to transfer money between friends, for example if you were eating together and subsequently split the bill between yourself. The latter is comparable to the way some people already use PayPal on their smartphones. Interesting at the point: Incidentally, one of the decisive heads at Libra is David Marcus, previously head of PayPal.

You will most likely be able to make Libra transfers directly in WhatsApp, Instagram and Facebook Messenger. Just like the quick exchange in other currencies (e.g. euros).

3. Who is behind Libra?

The organization behind the currency is the Libra Association (based in Switzerland), which was founded by the California group Facebook. 28 companies from the tech and finance industry are taking part, including big names such as Mastercard, Visa, Paypal, Vodafone and Spotify. The Libra Association acts as a central bank.

Will Libra automatically become a global success just because Facebook and its well-known allies are behind it? That can be doubted. The decisive factors for successful enforcement against dollars and euros are "security, data protection and the number of users," Markus Demary from the Institute of German Business (IW) told the industry magazine Der Shareholder. The last point in particular is exciting if you keep in mind that around 337 million people live in the euro area - but Facebook alone has almost 2.5 billion active users worldwide.

4. What do the critics say about Libra?

First of all, you have to be clear about the scale in which the Libra project is playing: "If even a fraction of Facebook users would adopt the new currency, Facebook would become one of the world's largest financial service providers and asset managers," explains financial journalist Stefan Wolff in the VDI news.

And that logically calls up numerous critics. They are concerned about various issues, such as fiscal questions (supervision?) And the trustworthiness of the company Facebook (Cambridge Analytica scandal). “Facebook is already too big and too powerful. It has used this power to misuse users' data without protecting their privacy. We cannot allow Facebook to run a risky new cryptocurrency from a Swiss bank account without supervision,”said Senator Sherrod Brown in a tweet.

Experts in Germany are also watching Facebook plans - they are united in the concern that private companies could increasingly take control of an area that was previously regulated by central banks. For Bild: MEP Danyal Bayaz (Bündnis 90 / Die Grünen) comments: “We as politicians have to ask ourselves whether our central bank should create its own offers, such as an e-euro. (…) It is about the question of who will actually have the privilege of creating money in the future. The State? Banks? Or digital companies like Facebook?"

Bundesbank board member Joachim Wuermeling calls for “global rules, and quickly.” In an interview with the FAZ, he points out: “We should prevent the Wild West from returning in the monetary system. It is an achievement that independent central banks provide stable and secure money. We have to keep this system, which enjoys great trust."

So we see that the last word about Libra is far from being spoken. But one thing is certain: the sheer number of Facebook, WhatsApp and Instagram users means that Libra, which will start next year, will be more than just a trend that will soon disappear again. It is much more likely that this digital currency will change global payments significantly. What this means for classic currencies and what impact it will have on cash, which is popular in Germany - these are the big issues that all of us are facing.