In a move to win regulators hearts, Facebook-backed The Libra Association has announced that its cryptocurrency will offer stablecoins backed by just one nations currency, meaning some coins offered would serve as the equivalent value of a dollar or a Euro. In a new white paper, The Libra Association has taken a scaled-down approach to wooing its critics, saying that Libra will focus on building a payment network in which coins are tied to a variety of local currencies.
"The Association has made changes to its initial approach, many of which depart from the approaches taken by other blockchain projects. The Association's goal was never to emulate other systems, but rather to leverage the innovative approach of using distributed governance through Association Members and distributed technology to create an open and trustworthy system," explained the group.
"We appreciate the discussions with policymakers around the world who have helped us understand key concerns so that we can integrate actionable improvements into the Libra payment system's design and into a phased rollout plan," the White Paper added.
Several US senators have opposed Facebook's digital coin, arguing that the social networking giant has been irresponsible with user data privacy. They have even called the digital cryptocurrency Libra "delusional" and "dangerous".
The Libra Association said that their vision has always been to complement fiat currencies, not compete with them - a key concern that was shared was the potential for the multi-currency Libra Coin to interfere with monetary sovereignty and monetary policy if the network reaches significant scale.
"We are therefore augmenting the Libra network by including single-currency stablecoins in addition to Libra coin, initially starting with some of the currencies in the proposed Libra basket, like US dollar, Euro or British Pound.
"This will allow people and businesses in the regions whose local currencies have single-currency stablecoins on the Libra network to directly access a stablecoin in their currency," the Association said.
The Libra project has courted controversies and telecom major Vodafone, which was one of the 21 organisations which signed onto the Libra Association charter in October, decided to exit the project. Companies like PayPal, Mastercard, Visa, Mercado Pago, eBay, Stripe and Booking Holdings have also withdrawn from the project.
Facebook and 20 partner organisations formally joined the digital currency project during a meeting in Geneva in October last year. The Libra Association said that each single-currency stable coin will be fully backed by the Reserve, which will consist of cash or cash equivalents and very short-term government securities denominated in that currency.
"We hope to work with regulators, central banks, and financial institutions around the world to expand over time the number of single-currency stablecoins available on the Libra network," it added.
Libra will not be a separate digital asset from the single-currency stablecoins but will simply be a digital composite of some of the single-currency stablecoins available on the Libra network.
Libra digital coin can be used as an efficient cross-border settlement coin as well as a neutral, low-volatility option for people and businesses in countries that do not have a single-currency stablecoin on the network yet.
"This approach has the added benefit of allowing the network to support a wider range of domestic use cases and of providing a clear path for seamlessly integrating central bank digital currencies (CBDCs) as they become available," said the Association.