Facebook’s Libra cryptocurrency project has been heading full steam at a global financial regulatory system-sized iceberg for a while now. But it might be trying to change course after finally realising that the iceberg will win.
Per a Tuesday report in the Information, sources say the Facebook-backed Libra Association will still roll out the product central to the whole thing: Libra, a blockchain-based cryptocurrency that would be run by a global consortium of financial and e-commerce firms..But it is now also expected also roll out digital equivalents of other government-issued currency, like the U.S. dollar and the Euro, that would function within the Libra payment network. Facebook, the key partner in the venture, will still roll out a digital wallet (Calibra) where users can store Libra. But the Information’s sources said that Facebook has now decided that Calibra will also function with the digital currency equivalents and that it will “emphasise” those over Libra at launch.
Furthermore, while Facebook intends to integrate Calibra with subsidiary WhatsApp and its Messenger platform, the Calibra platform might also be region locked in some places to prevent users from transacting in anything other than local currencies. While Calibra was tentatively scheduled to launch in June, the Information’s sources now say it has been delayed until October.
Facebook originally announced Libra in June 2019, with plans that it would be backed by a number of international currencies and various assets (making it a “stablecoin,” supposedly proofed against the wild fluctuations of other cryptocurrencies like Bitcoin). The whole plan for Libra was largely predicated on using the social network’s billions of users to rapidly bring it to scale. This pitch has come under assault from financial regulators across the planet, who are understandably worried that a company known for its endless series of screwups might be trying to launch a shadow financial system outside their control.
There was buzz last month that the Libra Association was instead planning on pegging its value to the U.S. dollar, thinking it might ease concerns from U.S. regulators wary of Facebook launching private currency backed by foreign reserves. Offering digital equivalents of government-issued currency is a much bigger concession, the Information noted. If the local alternatives are available, users might simply choose to… not buy Libra at all.
Moreover, the regulatory environment facing the project hasn’t let up and has likely grown more hostile over time thanks to the plan’s sheer audacity. In September 2019, a European Central Bank official accused the Libra Association of being “cartel-like.” In October 2019, a Group of 7 working group declared projects like Libra could wreak havoc across the planet and that they should not continue until regulatory concerns (including its potential use in money laundering and terrorism, privacy guarantees, how it would be taxed, and what financial services Facebook intended to build around it) were addressed.
Facebook CEO Mark Zuckerberg appeared before Congress in October 2019 in an attempt to smooth things over; he mostly got grilled on the multitude of scandals facing his company instead. According to Bloomberg, Treasury Department officials have continued to pester Facebook and the association about that whole money laundering thing, while some involved with the project have grown concerned that the Securities and Exchange Commission that Libra could be declared a security. That would be a nightmare for Libra, which would turn from a payment network into something far more unwieldy.
Several of the highest-profile Libra Association backers, such as PayPal, eBay, Stripe, Visa, and Mastercard have all bailed. It’s still unclear why, unlike most competing payment networks, Facebook and the association decided to go with a blockchain-based currency at all—at least without factoring in the power of buzzwords. As Ars Technica noted, while Facebook backed away from its vision of Libra as a “fully open, decentralized network” in attempts to satisfy regulators, it also introduced new potential roadblocks, like having to vet third-party developers or compliance with local law in hundreds of countries.
“The Libra Association has not altered its goal of building a regulatory-compliant global payment network, and the basic design principles that support that goal have not been changed nor has the potential for this network to foster future innovation,” an spokesperson for the association told Ars Technica.
Sounds like everything’s going great and there’s no need to panic; Libra just needs everyone to come up on deck and put on a life preserver, just in the unlikely case such a situation arises.