According to a recent Bloomberg report, Facebook might be considering a revamp of the Libra project to appease regulators. In the new plan, Facebook might consider launching a network that accepts multiple digital coins, including central bank digital currencies.
The Original Facebook Libra Plan
When Facebook was announced last year, it said that it intended to launch a global digital currency that was backed by a basket of fiat currencies. When this coin was launched, it would allow anyone, especially the 1.7 billion unbanked people globally, to send money via a text.
However, many regulators globally expressed concerns about the plan. They saw it as an attempt by a private company to launch a currency. Now Facebook appears to be reconsidering its plans due to intense opposition by regulators. According to the report, two people familiar with the project claim the Libra network could be changed to accommodate multiple coins.
These coins would include those issued by a central bank and backed by the USD, EUR, or any other fiat currency. The two people claim that Libra is soon going to be launched. However, they emphasized that the plan for a single global coin is not dead. Instead, the new plan will expand on Libra and not pull back.
Not Much Difference with Existing Systems
If Facebook decided to launch Libra and turn it into a payment system instead of a coin, many people might not see the difference with existing payment networks, especially in the US. According to Dante Disparte, who is the Libra Association’s head of communications, the association has not moved away from its goal of creating a compliant global payment system.
What Went Wrong
When the Libra Association was announced in June 2019, it had 27 members. The intention at the time was to connect people globally while bypassing the existing global financial system. It would reduce the cost and time of sending money, especially for those without bank accounts. At the time of its launch, major payment companies such as Mastercard and Visa were part of the project. However, a number of them have since left the project.
Almost immediately after it was announced, regulators in the US as well as lawmakers, expressed distrust about the project. They did not trust Facebook to manage such a huge project, especially after the company had been involved in massive mishandling of data from its users.
Globally, central bankers expressed concerns about the project undermining their ability to control their monetary policies. Finance ministers from the biggest economies globally also expressed concerns about its ability to enable money laundering. In Europe, some finance ministers vowed the project would never be allowed in their countries.
Facebook & Libra Not Giving Up
While the project has lost most of its major payment systems partners, the Libra Association has not given up. They continue to meet with members of the Treasury Department, the SEC, and other regulators in the US and abroad. While Facebook Libra might eventually launch, it might look very different from what was announced during the June 2019 launch and in its original whitepaper. This way, it will be able to accommodate the concerns of regulators.
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