Facebook and its partners are considering redesigning the libra cryptocurrency project so that the network accepts multiple coins, including those issued by central banks, in an effort to woo reluctant global regulators and rebuild momentum for the plan.
When Facebook unveiled libra, it said it intended to create a single global digital currency. Anyone, especially the 1.7 billion people who have no bank account, could send money anywhere in the world at little cost, as easily as sending a text.
Eight months later, after the idea ran into a wall of opposition, Facebook and the Libra Association, the consortium behind the digital currency, are looking at a revamp, said sources.
They are weighing a recast of libra as mostly a payments network that could operate with multiple coins, sources said. The coins could include those issued by central banks and backed by the US dollar, the euro or other currencies, the sources said.
The association will re-introduce libra soon, said the people, who asked not to be named because the redesign remains in flux and the plan could change. The dream of a single global coin isn’t dead, said a source. The new plan could expand, not pull back from, the original vision, the source said. But if the revamped libra becomes more of a payments network than a single, global cryptocurrency, the average US consumer might not see much difference between libra and existing payments systems run by PayPal or numerous fintech start-ups that aim to seamlessly move funds around the globe.
Global payment
“The Libra Association has not altered its goal of building a regulatory-compliant global payment network, and the basic design principles that support that goal have not been changed,” said Dante Disparte, head of policy and communications for the Libra Association, in a statement.
Facebook said it “remains fully committed to the project” . What happened to libra since its June 2019 unveiling is a story of hubris, wary lawmakers, protective regulators and partners fearful of the risks involved.
Facebook and 27 other companies announced the project as a way to connect the globe – while also circumventing the financial system – and reduce the cost of sending money, especially for unbanked populations. The project’s members included Visa, Mastercard and other large companies that would be Facebook’s partners in governing the system.
As originally envisioned, the libra coin would be created from a basket of relatively stable assets, such as US dollars and government bonds, euro, Singapore dollars, UK pounds and Japanese yen.
A libra reserve made up of those currencies and debt instruments would support the token, whose value would adjust along with the underlying assets’ market value. But the plan almost immediately ran aground.
Trust issues
US lawmakers said they didn’t trust Facebook to manage a financial network after the company’s high-profile missteps in other areas, especially its repeated failures to protect user data.
Officials at some central banks said the new digital coin could undermine the sovereignty of their own currencies, while finance ministers worried that it could enable money-laundering.
As the Geneva-based Libra Association tried to formalise its membership in October, many of its most prominent members, including Visa and Mastercard, dropped out. The project now has 20 of the original 28 members, though it recently added two others – cloud-based commerce company Shopify and cryptocurrency trading platform Tagomi Trading.
Even as some left the project for dead, representatives of Facebook and the association have continued to meet with officials at the US treasury department, the Securities and Exchange Commission, and other US regulators to address their criticisms, the sources said. – Bloomberg
