After Facebook announced that it planned to launch Facebook Libra, the backlash from regulators was unprecedented. Regulators from major companies globally vowed that the digital currency would never launch in their jurisdictions. Due to this backlash, there was speculation that Facebook might revamp Libra to appease regulators. It would appear that the speculation was on target. Facebook has finally decided to make changes to Libra to appease regulators.
The Revamped Facebook Libra
According to a recent blog post, the Libra Association is making drastic changes to how Libra will work. The new coin will now be pegged to individual national currencies. Besides that, international watchdogs will monitor its operations. The company is hoping that the restructuring will be more palatable to regulators globally.
When news came out that Facebook was planning to launch a digital currency, which could be potentially used by its 2.5 billion users, there was panic amongst central bankers globally. Most worried that it would be privately issued money, which would take away the power of central banks to control their monetary policies.
Libra made the revelation in an update discussing its application for a license from FINMA, the Swiss financial regulator. According to another blog post, the Libra Association will now offer single-currency stablecoins in addition to the original multi-currency coin.
Initially, the Libra Association planned to launch a single digital currency that would be backed by a basket of fiat currencies and government bonds. However, central bankers and regulators were not happy with the plan. They felt that it could have a destabilizing effect on the international monetary system while making it easier to launder money. Additionally, there were fears about user privacy.
To array some of the fears, the Libra Association will apply for a FINMA license. A college of financial regulators, central banks, and enforcement agencies from 20 countries will oversee the licensing process. However, the Libra Association did not provide further details on the composition of the college. It is also not clear how regulators will respond to the latest plan.
Launch Date Moved Forward
Initially, Libra was going to be launched in June 2020. However, the plans have since been pushed to mid-November up to the end of 2020. Some countries such as France have said they will block Libra from launching in their country.
Before Facebook Libra, most regulators did not pay heed to crypto. However, since the announcement of the planned Libra, several regulators have passed laws to regulate the crypto sector. It is also believed that some nations, such as China, have ramped up efforts to launch their own digital currencies due to Libra. However, the Libra Association believes the revamp would enable central banks to integrate their CBDCs into the Libra network.
Besides the launch of several stablecoins, which have not been named, the Libra Association will register with the Financial Crimes Enforcement Network (FinCEN) in the US as a money business. Consequently, it will enable Libra to be monitored for use in terror financing and money laundering.
While Libra has made some changes to its original plans, it is only after a thorough review by regulators globally, will they know if they have done enough to appease regulators. The Libra Association might still have to make further amendments in the future and we will be here to tell you about them.
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