Facebook’s Libra might launch in January, but there’s a catch
This is according to a report by the Financial Times, which cites three unnamed people involved with the project. However, it seems that this new Libra will be a limited version of what Facebook originally envisioned.
Libra was supposed to launch several digital coins, with some of them representing individual fiat currencies, like the U.S. dollar, and one being a composite of all these coins. And even this was a change from Libra’s original plan of launching one coin that would be backed by a basket of several currencies.
Now, the FT reports, the company plans to launch a U.S. dollar-pegged stablecoin, and roll the other currencies at a later point.
Dollar-pegged stablecoins are a fairly well-known type of cryptocurrency at this time. Companies such as Coinbase, Tether Limited, and Paxos have launched such coins (USDC, USDT, and BUSD, respectively), with the coins’ total market caps reaching hundreds of millions, or even billions of dollars. The point of stablecoins is to provide some price stability and predictability to users, as opposed to the notorious price volatility of cryptocurrencies such as Bitcoin and Ethereum.
This is probably why the The Libra Association, a Geneva, Switzerland-based non-profit founded by Facebook and several other companies, has decided to pare down its ambitions when it comes to Libra. Dollar-pegged stablecoins have been around for a while, and it’s harder for regulators to dismiss them as dangerous, as they did with Libra’s original plan.
Launching just one coin that’s pegged to a single currency might cause other problems for Libra, however. At launch, people at Libra told me that the plan is to minimize volatility, “so holders of Libra can trust the currency’s ability to preserve value over time.” The company also said one of the primary goals of the project is to give the 1.7 billion people who are unbanked access to a global currency, and remittances were often mentioned as an important use case. But if the Libra, the coin, is pegged to the U.S. dollar, this could mean additional costs for people in countries outside of the U.S.
To get where it is now, Libra had to shed a couple of partners (notably, PayPal, which recently launched support for Bitcoin and other cryptocurrencies on its platform) and appoint a couple of new executives, including ex-chief legal officer of HSBC, Stuart Levey, who currently serves as Libra CEO. The company expressed hope the changes it has implemented will placate regulators, which worry about large tech companies acting as financial institutions.