Facebook-backed cryptocurrency association to issue digital versions of single currencies, stepping back from controversial synthetic coin scheme
The Facebook-backed Libra project has drastically reduced the scope of its planned cryptocurrency, following a sustained backlash from regulators.
The move follows reports early last month that the independent, Switzerland-based project, whose development was led by Facebook, was planning on scaling back its initial plans.
The Libra cryptocurrency, announced last year, was originally intended as an electronic medium of exchange backed by an array of assets but independent of any national currency.
Critics, including central banks and regulators, argued this would create a host of risks ranging from money-laundering to the destabilisation of state-backed currencies.
The 22-member Libra Association now says its “Libra 2.0” plan is to focus on digital versions of single currencies, such as a Libra dollar or a Libra euro, backed one-to-one by cash or cash equivalents, with support from a capital buffer.
The group also said it would support the central bank digital currencies planned by some central banks.
The association said it is still planning to create a “multi-coin currency”, which it said would be a digital composite of some of its single-currency coins.
The group also said it no longer intends to move to a fully permissionless system over which no single authority has control, while maintaining the “key economic properties” of a permissionless system.
David Marcus, Libra’s co-creator and head of Facebook digital wallet subsidiary Calibra, said on Twitter that the Libra Association wants to create a “market-driven open and competitive network”.
Marcus said the Libra Association is now member-funded, with less than 10 percent of funding coming from Facebook, in an effort to increase its independence from the controversial social media company.
A number of the Libra Association’s original members, including Visa, Vodafone, eBay and PayPal, withdrew their support last year during the storm around the initial plans and the group’s links with Facebook.
The association said it would create a “financial intelligence unit”, while vetting providers of digital wallets that want to use Libra coins and ensuring the underlying technology is designed with regulatory compliance in mind.
It also said it has applied for a payment system licence from the Swiss Financial Markets Supervisory Authority (FINMA).
“We have worked with regulators, central bankers, elected officials, and various stakeholders around the world to determine the best way to marry blockchain technology with accepted regulatory frameworks,” the Libra Association said in a white paper on its revised plans.
It said its objective continued to be to integrate with existing frameworks while “enabling new functionality, drastically reducing costs, and fostering financial inclusion”.
Libra plans to launch its currencies by the end of 2020, rather than in June as was initially planned.