Libra (digital currency)

Libra is a permissioned blockchain digital currency proposed by the American social media company Facebook, Inc.

The currency and network do not yet exist, and only rudimentary experimental code has been released. The launch is planned to be in 2020.

The project, currency and transactions are to be managed and cryptographically entrusted to the Libra Association, a membership organization of companies from payment, technology, telecommunication, online marketplace and venture capital, and nonprofits.

History
Morgan Beller started working on cryptocurrency and blockchain at Facebook in 2017, and was initially the only person working on Facebook's blockchain initiative.

Facebook vice president David A. Marcus moved from Facebook Messenger to a new blockchain division in May 2018. First reports of Facebook planning a cryptocurrency, with Marcus in charge, emerged a few days later. By February 2019, there were more than 50 engineers working on the project.

Confirmation that Facebook intended a cryptocurrency first emerged in May 2019. At this time it was known as "GlobalCoin" or "Facebook Coin".

Libra was formally announced on June 18, 2019. The creators of the coin are listed as Morgan Beller, David Marcus and Kevin Weil (Calibra's VP of Product).

A first version is projected to be released in 2020.

On July 15, 2019, Facebook announced the currency will not launch until all regulatory concerns have been met and Libra has the "appropriate approvals".

In a meeting with top Senate Democratic leaders on September 18, 2019, Facebook chief executive Mark Zuckerberg told lawmakers that Libra would not be launched anywhere in the world without first obtaining approval from United States regulators.

PayPal left the Libra Association on 4 October 2019. eBay, Mastercard, Stripe, Visa and Mercado Pago followed on 11 October, and Bookings Holdings on 14 October.

In late February 2020, Shopify decided to join the Libra Association and contribute $10 million to become part f the initiative. The Libra Association has been working to address concerns from United States regulators with the development of a "Libra 2.0" blueprint.

Currency
The plan is for the Libra token to be backed by financial assets such as a basket of currencies, and US Treasury securities in an attempt to avoid volatility. Facebook has announced that each of the partners will inject an initial 10 million, so Libra has full asset backing on the day it opens. As of January of 2020, Libra is said to have dropped the idea of a mixed currency basket in favor of individual stablecoins pegged to individual currencies.

Libra service partners, within the Libra Association, will create new Libra currency units based on demand. Libra currency units will be retired as they are redeemed for conventional currency.

Initial reconciliation of transactions will be performed at each service partner, and the blockchain's distributed ledger will be used for reconciliation between service partners. The intent is to help prevent everyone but members of the Libra Association from trying to extract and analyse data from the distributed ledger.

In contrast to cryptocurrencies such as bitcoin which use permissionless blockchains, Libra is not decentralized, relying on trust in the Libra Association as "a de facto central bank".

In September, Facebook announced that the reserve basket would be made up of: 50% United States dollar, 18% Euro, 14% Japanese yen, 11% Pound sterling and 7% Singapore dollar.

Libra Association
Facebook established the Libra Association to oversee the currency, founded in Geneva, Switzerland. Initial membership as of October 2019 was:
 Payments: PayU
 Technology and marketplaces: Facebook's subsidiary Calibra, Farfetch, Lyft, Spotify, Uber, Shopify 
 Telecommunications: Iliad SA, Vodafone
 Blockchain: Anchorage, Bison Trails, Coinbase, Xapo
 Venture capital: Andreessen Horowitz, Breakthrough Initiatives, Ribbit Capital, Thrive Capital, Union Square Ventures
 Nonprofit and multilateral organizations, and academic institutions: Creative Destruction Lab, Kiva, Mercy Corps, Women's World Banking

Seven other companies had been named as Libra Association members in the initial June 2019 announcement, but left before the first Libra meeting on 14 October 2019: Booking Holdings, eBay, Mastercard, Mercado Pago, PayPal, Stripe and Visa Inc. Visa chairman and CEO Alfred F. Kelly clarified in July that Visa had not joined, but had signed a nonbinding letter of intent; and that "no one has yet officially joined." He said that factors determining whether Visa would, in fact, join included "the ability of the association to satisfy all the requisite regulatory requirements."

Vodafone joined the association in October 2019, but left in January 2020, saying they preferred to work on their mobile banking subsidiary M-Pesa.

Press coverage around the initial Libra announcement noted the absence of Apple Pay, Google Pay, Amazon and of any banks. Banking executives had been reluctant to join due to uncertainties surrounding regulation and feasibility of the scheme.

The association hopes to grow to 100 members with an equal vote.

Reception
The project has faced criticism and opposition from central banks. The use of a cryptocurrency and blockchain for the implementation has been questioned.

European Union regulatory response 
The first regulator response to Libra came within minutes of the launch announcement, from French Finance Minister, Bruno Le Maire, who was being interviewed on French radio station Europe 1. He said that Libra could not be allowed to become a sovereign currency, and would require strong consumer protections.

Le Maire then warned French Parliament of his concerns about Libra and privacy, money laundering and terrorism finance. He called on the central bank governors of the Group of Seven to prepare a report on Facebook's plans.

Bank of England governor Mark Carney said there was a need to keep an "open mind" about new technology for money transfers, but "anything that works in this world will become instantly systemic and will have to be subject to the highest standards of regulation."

German MEP Markus Ferber warned that Facebook could become a shadow bank.

On September 13, 2019, Le Maire stated that France would not allow development of Libra in Europe, as would be a threat to the monetary sovereignty of nations. He also spoke about the potential for abuse of marketing dominance and systemic financial risks as reasons for not allowing stablecoins to operate yet within the European Union.

US regulatory response
US regulators and politicians expressed concerns within hours of the mid-2019 announcement. Maxine Waters, Chairperson of the United States House Committee on Financial Services Committee asked Facebook to halt the development and launch of Libra, citing a list of recent scandals and that "the cryptocurrency market currently lacks a clear regulatory framework". The U.S. House Committee on Financial Services Democrats sent a letter to Facebook asking the company to stop development of Libra, citing concerns of privacy, national security, trading, and monetary policy.

Jerome Powell, chair of the Federal Reserve, testified before Congress on 10 July that the Fed had "serious concerns" as to how Libra would deal with "money laundering, consumer protection and financial stability."

President Donald Trump tweeted on 12 July that "If Facebook and other companies want to become a bank, they must seek a new Banking Charter and become subject to all Banking Regulations."

US regulators contacted Visa, PayPal, Mastercard and Stripe, asking for a complete overview of how Libra would fit into their anti-money-laundering compliance programs.

Other countries 
The Swiss Federal Data Protection and Information Commissioner, that David Marcus told the US Senate would oversee privacy for Libra, said that it had not heard from Facebook at all.

The government of Japan has begun the process of investigating Libra and doing an analysis on the effect on Japan's monetary policy and financial regulation. This will be done before the Group of Seven meeting in France between 24–26 August 2019.

Data protection regulators internationally issued a statement asking Facebook to protect personal data of users, and to detail Libra's planned practices for handling personal data, in the light of "previous episodes where Facebook’s handling of people’s information has not met the expectations of regulators, or their own users."

Finance Watch describes Libra as a "huge risk to public monetary sovereignty" and "concludes that Libra is a bad idea – for its users, for the stability of our financial system, and last but not least for our democracy."

On September 16, 2019, officials from the Libra consortium, including J.P. Morgan and Facebook, met with officials from 26 central banks, including the Federal Reserve and Bank of England, in Basel, Switzerland and the meeting was chaired by European Central Bank board member Benoît Cœuré, a vocal Libra critic.

Privacy concerns
Industry observers have speculated whether Libra will provide meaningful privacy to its users. Facebook's plan is to let its subsidiary Calibra manage Libra for Facebook users, and Facebook executives have stated that Calibra will not share account holder's purchase information with Facebook without authorization. However, the system is also planned to include a friend-finder search function, and the use of this function will constitute permission for Calibra to combine the account holder's transaction history with their Facebook account.

Fake Libra websites
Facebook tries to police inaccurate information and fake Libra websites on its platform.

Legal Issues
Libra Association faces legal challenges as both the name and the logo of the digital currency are already in use within different territories.

Finco Services, Inc has filed a lawsuit with New York Southern District Court against Facebook, Inc., Calibra, Inc., Jlv, LLC and Character SF, LLC for an alleged trademark infringement arising out of the use by the latter of a logo similar to the start-up bank operated by Finco Services, Inc. The plaintiff has requested a preliminary and permanent injunctive relief as well as monetary relief from the defendants. A settlement conference in this matter is scheduled for March 26, 2020 in the United States Courthouse, while the parties din not consent to conducting the proceedings before a magistrate judge and requested to be tried to a jury.

In Europe, Libra Association has filed an application with the European Union Intellectual Property Office for the registration of the word “LIBRA” as a verbal trademark. The proceeding has already received five oppositions to registration from four European companies based mainly on the alleged likelihood of confusion with their prior trademarks. The opposing companies are Lyra Network, Libra Internet Bank, Libri GmbH and Advanced New Technologies Co., Ltd. In April 2020, the parties will reach the adversarial part of the opposition proceedings, unless a settlement is reached during the cooling-off period.

Implementation

Blockchain consensus 
Libra will not rely on cryptocurrency mining. Only members of the Libra Association will be able to process transactions via the permissioned blockchain.

Libra hopes to begin transitioning to a permissionless proof-of-stake system within five years; although their own materials admit that no solution exists "that can deliver the scale, stability, and security needed to support billions of people and transactions across the globe through a permissionless network."

Software
Libra's source code is written in Rust and published as open source under the Apache License with the launch on 18 June 2019.

Elaine Ou, an opinion writer at Bloomberg News, tried compiling and running the publicly released code for Libra. As supplied, the software did little more than allow fake coins to be put in a wallet; almost none of the functionality outlined in the white paper is implemented, including "major architectural features that have yet to be invented." Ou was surprised that Facebook "would release software in such a state."

Digital wallet
Facebook plans to release a digital wallet called Calibra in 2020, to be made available in Messenger and WhatsApp, as well as in a standalone app.

Move
Move is the Libra blockchain's proposed smart contract and custom transactions language. It is planned to be a statically-typed programming language, compiled to bytecode.

The Move language syntax has not been released yet. An example Intermediate representation of the language is shown in the Move white paper:
public main(payee: address, amount: u64) {
    let coin: 0x0.Currency.Coin = 0x0.Currency.withdraw_from_sender(copy(amount));
    0x0.Currency.deposit(copy(payee), move(coin));
}

See also
 Beenz – an earlier attempt at an internet-wide digital currency
 Facebook Credits
 Flooz – an earlier attempt at an internet-wide digital currency
 List of online payment service providers

References

External links

Category:Cryptocurrencies
Category:Facebook
Category:Software programmed in Rust