Facebook’s Libra cryptocurrency project has undergone major changes. A number of key areas have been redesigned, including the payment system, the cryptocurrency Libra, and the addition of a new single-currency stablecoin. The changes are mostly aimed at complying with regulatory requirements.
Libra Project Redesigned, New Whitepaper
The Libra Association has published an updated whitepaper for the Libra project, which was originally announced by social media giant Facebook in June last year. Michael Engle, a developer at the Libra Association, explained some of the important changes in a blog post on Thursday.
Since the project was announced, “we have worked closely with regulators, central bankers, elected officials, and various stakeholders to shape innovative approaches to using blockchain technology to support licensed and regulated payment systems,” he shared, adding:
“We have made changes to our initial approach, many of which depart from the approaches taken by other blockchain projects“
The new Libra official report states that “Four major changes have been made to address regulatory issues that deserve special attention.”
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The first is “Offering a single currency stock in addition to multi-currency coins.” The second concerns “Increasing the security of the Libra payment system with a strong compliance framework.” The other two areas are “Continuing future transitions to permissionless systems while retaining key economic properties” and “Building robust safeguards into the design of the Libra Reserve.” Full details of the changes to the Libra project are outlined in the new whitepaper.
Single and Multi-Currency Stablecoins
Many regulators worry that the planned Libra cryptocurrency could disrupt their national currency and monetary policy if it reaches a sufficient scale, as used by Facebook’s 2.5 billion users. To solve this problem, Engle explains:
“We are augmenting the Libra network by including single-currency stablecoins (eg, USD, EUR, GBP, etc.)“
Instead of using existing stablecoins, such as tether (USDT), the single-state stablecoin Libra is self-issued, and the Libra coin (LBR) will be separate from them.
Initially, the Libra stablecoins will be the currencies that make up the proposed LBR basket, such as Librausd (USD), Libraeur (EUR), Libragbp (GBP), and Librasgd (SGD).
“We look forward to working with regulators, central banks and financial institutions around the world to increase the number of single-currency stablecoins available on the Libra network,” the Libra Association wrote.
The new plan “will allow people and businesses in local currency regions to have a single currency stablecoin on the Libra network to directly access stablecoins in their currency,” the whitepaper added. “Every single currency stablecoin will be fully backed by the Reserve, which will consist of cash or cash equivalents and short-term government securities denominated in that currency.”
New Libra Coin
The design of the Libra coin has also been changed. The new whitepaper explains that the new Libra coin “will not be a separate digital asset from the single currency stablecoin,” adding:
“Under this change, LBR will only be a digital composite of several single-currency stablecoins available on the Libra network”
“This will be defined in terms of a fixed nominal weight, such as the Special Drawing Rights (SDR) administered by the International Money Fund (IMF),”. The whitepaper notes, adding that this approach provides “a clear path to integrating digital currency seamless central banks (CBDCs) as they become available. “In addition, the Reserves” will have assets with short-term maturities, low credit risk, and high liquidity. It will also maintain a capital buffer. ”
New License and Launch Date
The Libra Association also announced on Thursday that it has started the formal payment system licensing process with the Swiss Financial Markets Supervisory Authority (FINMA), Switzerland’s financial regulator. According to reports, the association also plans to register with the US Financial Crimes Enforcement Network (FinCEN) as a money service business.
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In building the Libra system, the association has incorporated feedback from regulators. Amid regulatory scrutiny, several Libra backers have left the project, including Visa, Mastercard, Paypal, Vodafone, and Shopify. Some backers are now also backing a competing project, Celo. This week, the G20 discussed setting the rules for the regulation of stablecoins like Libra.
The planned launch date for the Libra project was originally set for late June. However, Dante Disparte, Libra Association’s head of policy and communications. Told the media that now the goal is to launch the project between mid-November and the end of the year.