Bloomberg: Libra may pivot to support multiple digital currencies to gain regulatory approval.

Facebook and its consortium members are considering redesigning the stablecoin project - Libra, so that the network can support a wider variety of currencies, including those issued by central banks, to alleviate concerns from global regulatory bodies and revitalize momentum for the initiative.

Libra Struggles to Make Progress

Libra is a cross-border global payment system jointly created by Facebook and 27 other companies. The project aims to provide a new form of global financial services for users worldwide, especially those without bank accounts. The founding members of the project include major companies such as Visa, Mastercard, and PayPal. However, due to significant regulatory pressure and the project's slow development, these major companies have announced their withdrawal in recent months.

Initially, when Facebook announced the Libra project, its vision was to create a global digital currency distinct from existing fiat currencies. The idea was to allow anyone, especially the 1.7 billion people without bank accounts and access to financial services, to send money anywhere in the world at low costs, similar to sending a document.

According to a report by Bloomberg[source], eight months after the announcement of Libra, the idea faced strong opposition from regulatory authorities in various countries. Some central bank officials expressed concerns that this new digital currency could undermine the sovereignty of their national currencies, while regulators around the world feared it could exacerbate global money laundering activities. As a result, Facebook and the organization behind the project, the Libra Association, are seeking improvements. Two sources revealed that they believe the revamped Libra may move towards a payment network with diversified currency operations.

From Single Currency to Diversified Currencies

Diversified currency operations mean that the Libra Association will not issue its own digital currency but rather issue digital currencies anchored to existing fiat currencies. In simple terms, for every dollar the Libra Association holds in a bank, it will release a corresponding amount of digital dollars in the Libra system; the same goes for euros, yen, and so forth. The mechanism is similar to the largest stablecoin issuer in the market, Tether.

Sources indicated that the association may soon introduce this change into the Libra system. However, they emphasized that the plan could still change as the redesign of the system has not been finalized.

While the dream of creating a brand-new global universal currency may not come true, the sources believe the new plan will expand rather than deviate from the original vision. If the improved Libra payment system replaces the initial single global currency payment system, ordinary consumers will not perceive a difference between using Libra and the existing payment systems operated by companies like PayPal that aim for seamless fund transfers.

Related Reading

• Fed Chair Acknowledges: Libra Rings Alarm Bells for Digitalizing the Dollar, Yet Privacy is a Concern
• BIS Head of Innovation on CBDCs, Libra, and Stablecoins

Join our Telegram channel for the latest updates on fintech, blockchain, and industry insights!