Last year in 2019, US-based social media and technology company Facebook had unveiled plans to roll out the Libra cryptocurrency project in 2020, pointing out digital currency as the futuristic global money that could be the base of a new type of financial system.
However, recently on Thursday, 16 April 2020, given criticism and intense regulatory scrutiny, the Company and its partners scaled back the project, making significant revisions and unveiling plans for a less ambiguous design for Libra, directed towards securing regulatory approval.
Now, the Libra project would be focused on the development of a more traditional payment network, wherein the digital currency will be linked to local currencies and overseen by international regulatory agencies. Consequently, the new design would make Libra like PayPal or any other standard digital payment services.
The earlier plans for Libra had led to scrutiny from global regulators over concerns that it could erode national control over money. Regulators and central banks were worried that Libra could result in destabilising monetary policy, support money laundering and impact the users’ privacy. Moreover, the most prominent supporters of the project such as Mastercard, Visa and PayPal had withdrawn due to the intense scrutiny.
Let us take you back when Facebook’s CEO Mark Elliot Zuckerberg had unveiled plans for the roll out of its digital wallet for Libra, along with skimming through changes being considered by the Libra Association.
Earlier plan for Libra
In June 2019, Facebook had updated the market regarding its plans to introduce Calibra in 2020, a newly formed subsidiary of the Company, planned to provide financial services that enable access as well as participation in the Libra network.
The Company had planned to launch Libra as a new global currency powered by blockchain technology on which it was working for almost a year. Libra was being designed to become an alternative global payment system that enable making digital payments from anywhere in the world.
Facebook had highlighted that the first product to be rolled out under the new subsidiary would be a digital wallet for Libra to be made available in Messenger, WhatsApp as well as an independent application.
To know more about Libra and Calibra, do read-
Libra Association Future Plans
Headquartered in Geneva, Switzerland, Libra Association is an independent membership organisation, working towards enabling a simple global payments system as well as financial infrastructure that can empower billions of individuals.
Members of the Libra Association have initiated the process to securing approval from the Swiss Financial Markets Supervisory Authority for the payment network. The association is also working with a college of regulators from 20+ nations to ensure that the authorities from these nations are on board. The Association aims to bring the network live during 2020.
As per the recent update from Libra developers, the group has been working with multiple stakeholders including elected officials, regulators, and central bankers for the development of an innovative method of using the blockchain technology to aid a payment system that is regulated and licenced.
The developers highlighted that they made changes to their initial approach after understanding key concerns amongst policymakers, globally, which would enable the integration of actionable improvements in the project design and then a rollout plan in a phased manner. Also, Libra Association in the updated white paper released during April 2020 pointed out four important changes that need certain attention.
4 Important changes to address regulatory concerns include-
- Providing single-currency stablecoins along with the multi-currency coin;
- Improving the security of the Libra payment system with a strong compliance structure;
- Waiving the future switch to a system where no permission would be required and at the same time preserving its main economic features; and
- Developing robust protection into the Libra Reserve design.
Changes that would directly impact developers include -
- Integrating Blockchain technology with accepted regulatory framework: Libra aims to develop a platform that is open and can be interoperated with protocol-level controls so that developers are able to meet the compliance. Thus, the developers are working towards determining the best approach for the integration.
- Offer a single currency stablecoin along with multi-currency coins: The Libra network is designed in a way that it can be accessed from any corner of the world. It would be an inexpensive payment system; however, this payment system is a complement to the domestic currency, and not a replacement. Libra is enhancing its network by including single-currency stablecoins like USD, EUR and GBP. On this front, they expect to work with regulators, central banks, and financial institutions, globally, with respect to the expansion of various single-currency stablecoins available on the Libra network as well as look for technical, operational, & legal needs to gain access to custody with these bodies.
- Phased network rollout: Since June 2019, Libra held discussion with the policymakers worldwide to determine a suitable phased rollout plan. In the first phase, the network would be accessible to Designated Dealers & Regulated Virtual Asset Service Providers (VASPs). At the same time, the team would work on developing its certification procedure for additional VASPs as well as its compliance structure for Unhosted Wallets, depending on the response from regulators.
- The team would also be implementing suitable assessment & risk controls for smart contracts.
The association plans to roll out the project by end-2020.