The white paper for Facebook’s much-anticipated cryptocurrency has been updated on libra.org, which is the official webpage for the social network-led project. Aside from expected amendments reflecting the revised Libra Association members, the biggest change is that the network will issue multiple stablecoins, instead of creating a single global digital currency.
Facebook Inc. and its partners said they are redesigning the proposed cryptocurrency to ensure that Libra is not being built to compete with sovereign currencies or interfere with monetary policy.
The new changes are apparently an effort to woo reluctant global regulators and rebuild momentum for the plan.
In a major revision to the Libra white paper, the project will initially start with issuing several coins, each backed by one currency listed in the proposed LBR basket (e.g., LibraUSD or ≋USD, LibraEUR or ≋EUR, LibraGBP or ≋GBP, LibraSGD or ≋SGD).
Each single-currency stablecoin will be backed by reserves consisting of cash or cash equivalents and government securities denominated in its fiat counterpart. When Facebook originally unveiled Libra in 2019, it intended to create a single fiat-backed stablecoin that would allow anyone to send money anywhere as easily as sending a text via its messenger.
But under the new changes, LBR will represent a basket of the multiple stablecoins available on the network, rather than being directly associated with fiat currencies. In other words, it would be a composite stablecoin backed by stablecoins, too.
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This redesign, however, could turn Libra to mostly a payments network like PayPal and similar Fintechs that operate with multiple coins to facilitate money transfers around the globe.
“The main downside of these changes is that the system is less open, and less decentralized, therefore the bitcoin community will probably disregard this as another centralized project,” said Yoni Assia, CEO and Co-founder of eToro.
While the initial idea ran into a wall of opposition, Libra Association expects the new approach to support a wider range of domestic use cases and provide a clear path for “integrating central bank digital currencies (CBDCs) as they become available.”
Furthermore, the recent document spells out various updated facets of the project, including:
- Enhancing the safety of the Libra payment system with a robust compliance framework.
- Forgoing the future transition to a permissionless system while maintaining its key economic properties.
- Building strong protections into the design of the Libra Reserve.
Addressing some of the other concerns, the Libra Association said it plans to improve the safety of its payment system to ensure data security, consumer protections and fully comply with anti-money laundering rules.
More specifically, it will impose balance and transaction limits to the so-called “Unhosted Wallets,” since their activities may pose a greater risk. In a section describing how the consortium will govern the Libra payment system, the white paper states:
“Initially, the network will only be accessible to Designated Dealers and Regulated VASPs while the Association continues to develop its certification process for other VASPs and its compliance framework for Unhosted Wallets based on the feedback received from regulators. The Association intends to make the network accessible to Certified VASPs and Unhosted Wallets once the relevant compliance frameworks have been finalized.”