On April 16, 2020, the Libra Association revealed that it would be backing down from creating a single stablecoin that would be backed by a basket of fiat currencies. Instead, the project now aims to launch multiple versions of Libra.
Spearheaded by Facebook, Libra was unveiled last June and marketed with a promise of reaching the unbanked folks globally by leveraging Facebook’s two-plus billion bases of active monthly users and by being as easy to send funds as email.
This proposal rattled lawmakers and regulators around the world, drumming up fears that Libra, when released, would create financial instability by interfering with monetary sovereignty and monetary policy.
The Libra Association revealed a dramatic reversal to its initial plans on Thursday by announcing that it plans to support multiple Libra stablecoins, with each working as a digital version of a country’s existing currency.
The organization has also kick-started talks with Swiss financial watchdogs for a payment license and is looking to register with the U.S. Financial Crimes Enforcement Network (FinCEN), according to Dante Disparte, head of policy for the Libra Association.
Disparte added that the Libra Project is now working toward a late 2020 readiness timeline.
Will Libra Lose its Authenticity?
Instead of being a single digital currency that facilitates cross-border transactions, Libra is now looking to become a digital payment network that supports numerous digital Libra coins that are linked to local fiat currencies.
By becoming similar to payment networks such as Venmo, which are also tied to local currencies, Libra may have lost its innovative edge.
That said, the new plan could be a success as it will allow people and businesses in the regions whose local currencies have single-currency stablecoins on the Libra network to access a stablecoin in their currency directly.
For the plan to work effectively, the Libra Association will have to work closely with regulators, central banks, and financial institutions around the world to expand over time the number of single-currency stablecoins available on the financial network.
How the New Multi-Currency Coin Will Work
The new proposed stablecoin will essentially function as a composite coin so that when a user buys, sends or receives Libra, they’ll actually transact stablecoins that are backed by U.S. dollars, euros and British pounds, among other currencies.
As for the role of the Association and its ability to control the network, unlike decentralized blockchains like Bitcoin, Litecoin, and many other crypto coins, Libra members will manage the network.