update 6 October 2021

Facebook’s Libra Shows Promise to Support Both Crypto and Fiat Currencies

Facebook has revealed its intentions to make some key re-designing of its Libra project. The 3rd March 2020 announcement aims to make the network compatible with multiple coins, including some issued by various central banks. This effort is an attempt to entice reluctant financial regulators in Europe and the US as well as revitalize its project’s momentum.

Libra Reorganizes Due To Opposition 

At the dawn of the Libra project’s launch, the social media giant outlined the project’s main goal as being to create a single global digital currency. About 1.7 billion people characterized as unbanked globally are the target clients. Libra has the aim of revolutionizing the sending of money through cheaper costs and faster transactions. 

The project’s idea however soon ran into some heavy opposition, prompting a realization from Facebook. The Libra project switched to largely being a payments network compatible with multiple digital coins. Coins issued by central banks and backed by the US dollar, the euro, and other major fiat currencies are also inclusive.

The dream of a single global coin isn’t done for, this planned overhaul of Libra may likely encompass the original digital token vision.

Payments network VS. Single Global Cryptocurrency

The revamped Libra project may follow two paths. If it leans further towards being a payment network, users will experience no difference with other existing financial remittance firms like Moneygram, Paypal. 

If it, however, morphs into a single and truly global crypto, it will stand out. The Libra coin was originally envisioned to be created from a collection of relatively stable assets. The assets would be national fiat currencies, with the support of debt instruments.

Bumpy Road For Libra

US lawmakers quickly struck a blow on the project shortly after its inception. According to them, there wasn’t sufficient trust on Facebook to manage a financial network after repeated inability to protect user info. They also viewed the Libra coin as a threat to the sovereignty of national fiat currencies globally.

Prominent members of the Geneva-based Libra Association such as Visa and Mastercard abandoned the project late last year. Total members thus reduced to 20 from 28. Lately, the project has gained some momentum and experienced renewed interest. The Canadian cloud-based commerce startup Shopify Inc and the crypto trading platform Tagomi Trading LLC joined in the past few weeks. 

Despite this, the Libra Association is concerned about their project’s future following an ongoing SEC legislation. If the body rules that a token backed by a basket of currencies is a security is a tradable financial asset, it will spell trouble.

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Such a ruling would mean that the Libra coin would have to comply with several disclosure requirements. It will also be obliged to enforce the same strict restrictions that the financial regulator places on stocks. That will irrevocably damage the crypto’s usability as a means of exchange.