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Type Bachelor's Thesis
Scope Discipline-based scholarship
Title Libra versus central bank crypto currencies
Organization Unit
Authors
  • Sacha Badolato
Supervisors
  • Inke Nyborg
  • Steven Ongena
Language
  • English
Institution University of Zurich
Faculty Faculty of Business, Economics and Informatics
Date 2020
Abstract Text Libra was initially announced in 2019 by the Libra Association. It is an ambitious project with a global scope and is scheduled to launch in 2020. The Association plans to issue Libra coins and create an international payment system to improve financial inclusion, provide more efficient payments, and reduce transaction costs. Libra is based on blockchain technology and is a form of digital token money. Opposed to that central banks are working on issuing their own digital money, so called central bank digital currency (CBDC). Whilst Libra is currently undergoing a licensing process by the Swiss Financial Market Supervisory Authority (FINMA), CBDCs are still at a conceptual stage. This paper describes the technological background and legal framework regarding digital money. The expertise and opinions of established financial authorities and organisations are collected, and an in-depth view of the challenges, concerns, and potential of the Libra project is provided. Libra and CBDCs are examined in detail. Using the money flower model and supplementary criteria, the two currencies are analysed in order to assess how Libra compares to CBDC and traditional cash. With a view on other projects such as e-krona1 and Chinese mobile payment services,2 this paper concludes three possible outcomes for a successful launch of Libra, those being: (i) competition, (ii) complementation, or (iii) coexistence. In which of the three scenarios Libra will find itself may vary with the advancement of financial sectors and the area-specific public demand for money. The exact manner in which the project will be adopted by the general public and interact with CBDCs remains unclear at this stage. However, it is likely that the project, which has over 2.6 billion users worldwide, will be of significant scale and force market participants and financial authorities to reconsider their stance and approach to digital money.
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