Libra is a cryptocurrency proposed by Facebook in 2019. The project faced significant regulatory scrutiny and pushback from governments and central banks around the world, who raised concerns about the potential for financial instability, money laundering, and consumer protection.
To address these concerns, Facebook announced changes to the structure and governance of the Libra project in April 2020. The original plan, which involved a single Libra coin backed by a basket of fiat currencies, was replaced with a multi-coin system where each coin would be pegged to a single fiat currency. The Libra Association, which was to be responsible for governing the network, was also reorganized, with more emphasis on regulatory compliance and oversight.
In addition, Facebook announced that it would not launch the cryptocurrency until all regulatory concerns were addressed, which has not happened yet.
Overall, due to the regulatory pressure, Facebook made several changes in its strategy to launch the cryptocurrency and wants to ensure that all regulatory concerns are addressed before launching it.
The establishment of Libra is not easy for Facebook. In just a few days, we saw the departure of major partners in the project, but also the announcement of strong opposition from France, Germany, and Italy. Clearly, this decentralized global money project does not please the powers that be, especially the central banks. One of the reasons given is precisely the sovereignty of states and central banks. Creating a currency from scratch that would be backed by a “synthetic unit” is problematic. This stable global corner would indeed be managed outside the classic circuit and would have no connection with current currencies. A stable wedge is a type of cryptocurrency that is based on another asset and therefore has a stable value over time, avoiding the excessive volatilities observed in this area. This can be an already existing currency (euro, dollar …), any raw material (oil, gold …) or another cryptocurrency.
So far, Facebook has chosen to back its future Libra cryptocurrency to a “synthetic unity”, making it completely independent and allowing it to keep a global common value around the world.
The Libra would thus be backed by local currencies. But this is “only one of the options that must be considered”. The change, of course, is still far from being done, but it is an opening towards some critics received. There is still a long way to go before the launch, which is still planned for June 2020 at the moment.