Facebook Narrows Scope of Proposed Libra Cryptocurrency

Facebook and its partners pulled back their ambitious plans for the Libra cryptocurrency, which was unveiled last June as “a futuristic global money” that could be the foundation of a “new kind of financial system.” In the months since its June debut, the Libra project has encountered a range of obstacles and the scrutiny of regulators. The Swiss-backed Libra Association, citing global opposition to the project, now aims to create a payment network with coins tied to a local currency.

The New York Times notes that, “while Libra will also have a coin backed by multiple national currencies, which was the focus of the initial design documents, that will be less prominent.” The turning point in the “global outpouring of opposition” to Libra came when Facebook chief executive Mark Zuckerberg appeared before Congress, where he was “taken to task for potentially bypassing many regulatory approvals for Libra.”

Visa, Mastercard and other financial companies withdrew from the project, leading some to predict that “Libra would not be able to move forward.”

Since then, the Libra Association reported having “begun the process of getting regulatory approval for the payment network from the Swiss Financial Markets Supervisory Authority,” which is “working with a ‘college’ of regulators from over 20 countries.” The Libra Association also added Shopify and financial firm Tagomi, for a total of 22 current members, and is still planning on launching this year.

The Association also ended “plans for Libra to take the distinctive open architecture of Bitcoin … [and its] so-called permissionless quality that allows anyone to build on it,” a feature that led some observers to fear that “terrorists and others could use Libra for underhanded reasons.” Instead, Libra will be a “closed system in which only partners with the approval of the association can build infrastructure, such as wallets, for the coins.”

“I suspect this round will be better received, but that depends on how the story is told, and the accuracy with which it is told,” said Libra Association vice chair/head of public policy Dante Disparte. With the coronavirus lockdown, Kiva chief strategy officer Matthew Davie, who is one of the Libra Association’s five board members, noted that, “the virus is highlighting the need for digital payments.”

“If you look at those who are getting left out, it is those who are not digitally connected,” he said.

Libra still faces obstacles; its appearance “led several countries, most notably China, to speed up plans to develop their own digital currencies.” But Libra Association members “said it would work with countries that had their own digital currencies,” creating “multiple coins, each backed by a different national currency, in order to make local commerce easier.”