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Facebook chooses Switzerland for Libra Coin

Facebook chooses Switzerland for Libra Coin

Tokyo (SCCIJ) – The Swiss city of Geneva will become the center of Facebook’s announced global digital currency Libra Coin. The Libra Association responsible for designing, issuing, and deleting the Facebook currency is registered in Geneva and headed by the Swiss David Marcus, who grew up in Geneva before moving to Silicon Valley. The association may create Libras in Switzerland from 2020. Facebook has chosen Switzerland as its Libra base for well-thought-out reasons.

Facebook chooses Switzerland for Libra Coin

Facebook's Libra Coins will be designed, created and deleted in Geneva

Blockchain-based currency

Libra Coin will be tied to a collection of low-risk liquid assets in stable currencies such as the dollar or the Swiss franc, including bank deposits and short-term government bonds. Like other cryptocurrencies, a blockchain registers all transactions. Switzerland has the reputation of being a blockchain- and digital asset-friendly country calling itself a “crypto nation.” The Swiss stock exchange SIX is building a fully integrated trading, settlement, and custody infrastructure for digital assets.

Switzerland has attracted many start-ups in the field, with the canton of Zug promoting itself as the heart of a Swiss “crypto valley.” Also, the modern infrastructure of the country supports the creation of digital currencies. By settling in Geneva, Facebook hopes to benefit from this positive attitude and image of Switzerland as well as its open regulatory framework.

Another motivation for its Swiss operation is Facebook’s worry of stronger regulation. “By founding a non-profit association in Switzerland, Facebook wants to protect itself against the imminent proceedings for monopoly abuse in the USA,” told Aleksander Berentsen, Professor of Economic Theory at the University of Basel, a Swiss newspaper. The dismantlement of the company would not affect the Libra Coin.

Many details still unknown

Experts estimate the cost for Facebook to issue a global digital currency from Switzerland at 100 million dollars. To receive a permit from the Swiss Financial Market Authority, Facebook has to abide by Switzerland’s regulations. For example, it has to observe the rules for combating money laundering. Then, it needs to meet the regulatory requirements of other countries. However, users cannot purchase the Libra directly from or sell it to the association in Geneva. Instead, the Libra would be traded on stock exchanges around the world.

The high cost of issuance may not hinder Facebook because its Libra Association is made up of 28 prominent company members, among them Visa, Mastercard, eBay, Paypal, Uber, and Spotify. Interestingly, no traditional bank has joined the association so far. Perhaps, banks are waiting for more details because the business model behind the new currency has not become fully transparent.

For example, depending on the design of the Libra, the association may need a banking license. Also, there is still no known depository bank that could forward a potentially due final withholding tax to the tax office. Because the Libra value is not based on the respective national currency of the user but linked to various global currencies, tax payment problems for users could arise in their respective countries.

Text: Martin Fritz for SCCIJ; Photo: Geneva (Pixabay CC0)

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