Facebook Inc. and its partners have revamped their initial cryptocurrency project plan to issue a multi-currency Libra Coin in an attempt to ease global regulatory concerns. The main highlight of the new plan is the proposed move away from Libra’s original vision of a global digital currency backed by national currencies and into a range of single-currency stablecoins.
The Libra Association, the body in charge of the proposed Libra (LBR) cryptocurrency project has repackaged the digital currency and made a couple of other changes in a bid to make it more acceptable to skeptical regulators worldwide.
This move comes in response to concerns raised by the U.S. Congress and other key stakeholders that a multi-currency digital coin could effectively undermine the monetary sovereignty and monetary policy of central banks, especially if the network were to reach significant expansion and large volumes of payments were made in LBR.
Libra to be Backed by Stablecoins
With the multicurrency aspect of Libra being a major bone of contention, the Libra Association announced that it is now shifting away from that original roadmap and will instead support multiple Libra stablecoins. Under this new setup, each coin will mirror the digital version of a country’s existing currency, meaning we can expect to see LibraUSD, LibraEUR, LibraGBP, LibraYEN, etc.
Libra co-creator, David Marcus made this known in a recent tweet highlighting the creation of single currency stablecoins in addition to the Libra coin.
The 20-second version of the technicalities involved with this updated design is that the group has commissioned a smart contract that ties the fixed nominal weights of underlying stablecoins together so LBR can be seamlessly pegged to their respective values across different countries.
“This will allow people and businesses in the regions whose local currencies have single-currency stablecoins on the Libra network to directly access a stablecoin in their currency… LBR will simply be a digital composite of some of the single-currency stablecoins available on the Libra network.” the Libra Association stated in its updated whitepaper.
Speaking to Bloomberg, the head of policy for the Libra Association, Dante Disparte outlined their plans to roll out the Libra network by late 2020.
Other Key Changes to the Libra Cryptocurrency Project
The Libra Association is reportedly in talks with Swiss regulators about obtaining a payments license, while also outlining plans to register as a money services business with the U.S. Financial Crimes Enforcement Network.
Another significant change is the project’s abandonment of its initial plans to transition to a permissionless system. This was also in line with concerns raised by regulators that such a system could compromise the security of the Libra payment system.
“Regulators raised thoughtful questions about the perimeter of control for the Libra network — in particular, the need to guard against unknown participants taking control of the system and removing key compliance provisions. We believe it is possible to replicate the key economic properties of a permissionless system through an open, transparent, and competitive market that is inherent to a permissioned system.” The statement read.
When Facebook first unveiled Libra, it was intended as a single global currency backed by a basket of fiat currencies and securities. With the heavy criticism that followed, Libra seemed stuck in a regulatory quagmire. With this revised white paper outlining a more compliant roadmap, however, it would appear that the gears are finally turning again, albeit for the time being.