What does Facebook really want with Libra cryptocurrency | 08/28/19 2

What does Facebook really want with Libra cryptocurrency | 08/28/19

With Libra, Facebook wants to establish a valid digital currency worldwide. The reasons for the attack on the cryptocurrency market are interpreted differently by many observers.

• Facebook's Balance is strongly criticized
• Libra should be an engine of growth and a guarantor of income in particular
• positive social effects as side effects

The internet giant, Facebook, wants to move with its own cryptocurrency, Libra, into the digital currency market. But many experts do not relieve the group of his selfless motives.

Regulators react much earlier than at Bitcoin & Co.

When the Internet company announced that it wanted to launch its own cryptocurrency with Libra, this caused a sense of excitement among cryptocurrency fans. But the good mood did not last long, because soon after, many regulators have spoken, acting as killers of the mood. Not only privacy advocates and finance ministers, central banks have also criticized Facebook's projects in a timely manner.

The world's largest cryptocurrency Bitcoin, however, has long been rejected by regulatory authorities as a niche product and smiled – only with cryptohype in 2017, Bitcoin and Co. catapulted since no longer reached records, regulators around the world have become aware and discussed measures, the digital piece put on the chain.

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Concern for the attack of the established monetary system

Clearly, Libra does not want to repeat this mistake – and is already heavily targeting Facebook's cryptographic project in the planning phase. Because for the first time, this is a private company that threatens to become a competitor of established and sovereign currencies with a single product. Criticisms about Facebook's plans were so overwhelming that even in the meantime, even the company itself has expressed doubts about the possibility of implementing them. The main concern of many critics that Libra could be used for money laundering or terrorist financing can only be advanced: in fact, many economic figures have indicated that Libra was considered a serious competitor of the monetary system in place. The concern for loss of influence over important parts of the monetary system, apparently the makers, especially around. Because with the spread in the Facebook ecosystem, next to Facebook, among others, Instagram and WhatsApp Libya would have billions of potential users in one fell swoop – the state monopoly over the currency could at least falter. And even central banks could be considerably limited in monetary policy options regarding their influence on the monetary system, when a widely used cryptocurrency of a private company is in circulation.

What does Facebook really intend to do with Libra?

But if Facebook plans to reverse the financial system established with Libra, remains at least questionable. After the massive criticism that had hit the company after the publication of the Libra plans, the leaders of the American Internet giant had replicated and reported concessions. All concerns about Libra wanted to be completely eliminated before the introduction, was heard. The fear that Facebook wants to attack the established monetary system, Facebook also calls unfounded. We do not intend to compete with national currencies and also on the market monetary policy If you do not want to influence Libra, said David Marcus, head of the cryptographic project on Facebook.

Instead, the company points out that with Crypto, millions of people in the world who do not yet have a bank account have access to cashless payments. The motive quite noble, however, many observers doubt. Because Facebook, as a listed multi-billion dollar group, is committed primarily to economic interests. With a potential customer pool of billions of people, Facebook would have more customers than established banks at one go – without having to spend too much money: "It's a great business model for Facebook, they produce expensive Libra tokens they sell nothing, and sell them at a good price What do you want more than a commercial idea that I sell something completely worthless for good money ", recently criticized economist Peter Bofinger.

Balance boosts Facebook's advertising activity

In fact, the Libra association, a Swiss non-governmental organization created specifically for this purpose, bringing together issuers of credit cards Facebook, MasterCard and Visa, as well as the payment service provider PayPal and the car broker Uber, would be well deserved if Libra were to be widely disseminated. Additional income is expected, mainly from interest income, which may vary depending on the size of the deposits. In addition, Facebook has launched its own Libra portfolio with Calibra, with which entry into the world of Libra payments should be fast and simple. Again, Facebook would earn money again, because every transaction would likely result in a fee. Advertising revenue – the most important source of revenue for Facebook – will likely continue to increase with the spread of Libra. Because Facebook keeps users with the payment option in their own ecosystem – which advertising customers are likely to appreciate. For retailers too, Facebook would become more and more attractive if Libra could guarantee that potential customers stay longer on Facebook platforms. Advertisements on Facebook, Instagram and probably also in Whatsapp should be much more appealing in this context and with Facebook's bubbling earnings guarantee.

Positive side effects included

However, not all experts believe that Facebook's priority with its Libra plans is to develop its own activities. "Of course, Facebook is a for-profit company and will do everything possible to increase its profits with the help of Libra, which is true, but the market system generally works so that companies maximize their profits. while maintaining a surprisingly positive side effect – social benefits can also result, "said Dr. Cyrus de la Rubia, chief economist of the Hamburg Commercial Bank since 2012, in an interview with Deutschlandfunk Kultur.

An important side effect in this context is that "access to funding is granted to people who simply do not have it in a normal environment," added Mr. de la Rubia. The stated goal of Facebook is to make financial services accessible to many people, even if they do not have a bank account, so that they can realize it, even if the economic interests may have been to the origin of Libra projects.

Editors finanzen.ch