Facebook‘s controversial cryptocurrency project has “failed” in its current form, according to the Swiss president.

Ueli Maurer, who also serves as Switzerland’s finance minister, said that Facebook’s Libra would not be accepted by central banks and therefore not work as a currency.

“I don’t think [Libra will succeed], because central banks will not accept the basket of currencies underpinning it,” Mr Maurer told Swiss broadcaster SRF. “The project, in this form, has thus failed.”

The technology giant unveiled Libra earlier this year and plans to launch it at some point in 2020, however it has faced significant criticism from financial regulators and privacy advocates.

Libra shares some characteristics with bitcoin, such as recording transactions through an online ledger known as a blockchain, but it relies upon a more centralised infrastructure that has the support of major businesses.

Facebook says Libra, which is set to be issued and governed by the Geneva-based Libra Association, will be supported across its suite of apps – including Instagram and WhatsApp – while also serving the 1.7 billion people in the world who do not have access to traditional financial services.

With more than 2 billion users of Facebook apps around the world, Libra could potentially rival established currencies like the US dollar and destabilise the current financial system, which has led to significant pushback in both the US and Europe.

In September, French economy and finance minister Bruno Le Maire said he would block the development of Libra on European soil because it poses a threat to “monetary sovereignty”.

A recent report from London-based bitcoin exchange Luno suggests that a new global cryptocurrency could fill the gaps that both traditional currencies like the US dollar and cryptocurrencies like bitcoin fail to fill. The Future of Money survey found that developing markets would be quicker to adopt a currency like Libra than more developed countries.

“Our research shows that in these markets people are more financially savvy because they have to be, which means that they need and understand the benefits the new coins can offer,” said Marcus Swanepoel, Luno’s chief executive. “If a cryptocurrency can provide a secure and cheaper means of exchanging value, better than the existing system, it will be used.”

The new cryptocurrency had been widely rumoured since early 2018, when Facebook set up its own blockchain group to explore ways to utilise the technology. 

With more than 2 billion users of Facebook-owned apps around the world, many have heralded Libra’s potential to become the world’s first mainstream cryptocurrency, however others have questioned the motives behind the initiative.

Value stability

Unlike bitcoin, the value of Libra is tied to a collection of currencies in order to prevent price volatility – one of the main reasons people cite when explaining why bitcoin is unsuitable for use as a mainstream currency.

Despite several major retailers accepting bitcoin, the world’s first cryptocurrency has become more commonly used as a store of value or speculative investment.  

Libra is not the first so-called stablecoin, with a Goldman Sachs-backed startup among several other cryptocurrency projects that have used this method to prevent huge price jumps. But it will be the biggest and most ambitious to date.

“Libra will be a very different beast to bitcoin as it is pegged to a basket of currencies, and as a result it will be a lot less volatile and will be viewed more as a currency as opposed to a store of value,” said Giles Hawkins, a partner at Ashfords Solicitors.

‘Invasive and dangerous’

The launch of Libra comes at a turbulent time for Facebook, following just over a year after the Cambridge Analytica scandal exposed the private information of tens of millions of its users. Since then, the tech giant has been plagued by a series of data breaches that has fundamentally undermined trust in Facebook and its accompanying apps.

Critics of the new cryptocurrency include Phil Chen, a blockchain expert who pioneered the world’s first cryptocurrency-enabled smartphone for HTC. Mr Chen claims Facebook’s involvement means Libra is “the antithesis of bitcoin” and another step towards total control of data and users.

“If you’re concerned with Facebook knowing too much or having too much access to your private data, well this global coin is the most invasive and dangerous form of surveillance they have designed thus far,” Mr Chen told The Independent.

“If this is launched and adopted worldwide, we’re bound to see Facebook in the top 10 biggest companies for the next 100 years that have complete ownership of the customer and their data, from their social graph to every transaction recorded through Facebook, WhatsApp and Instagram.”

Source: Independent

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