On June 10, 2020, Dante Disparte, head of policy at the Libra Association, revealed that the initial effort by Libra to create a single stablecoin backed by numerous fiat currencies triggered a “space race,” especially regarding central bank digital currencies (CBDCs).
The Libra crypto project’s updated white paper from April 2020 has since scaled back on the global stablecoin to a series of fiat-backed stablecoins to gain regulatory compliance.
Now, the Libra Association plans to support multiple stablecoins, with each working as a digital version of a country’s existing currency.
The project’s first whitepaper that was published in June 2019 had to be abandoned, as it rattled lawmakers worldwide due to fears that Libra would create financial instability by interfering with monetary sovereignty.
In an attempt to revamp Libra, the organization has now started talks with Swiss financial watchdogs for a payment license.
U.S Regulators Forced to Consider a Digital Dollar
The race for launching CBDCs is at its peak with China closest to deploying its eYuan, leading to heightened fears over the nation beating American in this digital tech race and becoming the next financial world power.
This has forced regulators to consider the idea of the digital dollar, with Forbes recently reporting that the U.S House of Financial Services Committee’s Task Force on Financial Technology is planning to organize a hearing on how to improve the delivery of stimulus cash during disasters such as COVID-19.
As per the Forbes report, the congressional hearing will focus on how a
The digital dollar can improve the delivery of stimulus payments to the unbanked in the ongoing Coronavirus crisis.
Libra now hopes that CBDCs such as the digital dollar could be directly integrated with their decentralized network, with the project’s updated whitepaper making an argument for the tokenization of the digital dollar.
In this particular instance, the Facebook-led project appears to be extending its hand to U.S. regulators and offering a convenient approach to deliver a CBDC into the hands of citizens.
Why a Central Bank Digital Currency?
Since Facebook announced its plans to come up with their own Stablecoin, a heated debate has arisen about whether central banks should issue their own digital currency.
The main reason why central banks may introduce their own digital currency is as a defensive move against the rise of digital currencies like the Libra.
As such, these decentralized currencies can make it difficult for central banks to manage their foreign exchange controls and implement a sound monetary policy.