Libra redefines itself to reassure regulators and central banks

Libra redefines itself to reassure regulators and central banks

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Pound change your white paper. The Association behind the ‘stablecoin’ project has announced changes to its definition this Thursday, specifying that, in addition to the ‘multi-currency’ currency that it has been talking about since last year, Libra will also offer currencies linked to a fiat currency in a individual. That is, apart from a global pound with several currencies inside, there will also be pounds linked to only one currency each. In addition, in statements to El Confidencial, the Association’s CEO and COO, Bertrand Perez, has confirmed that the launch date is now expected for “End of 2020” – when the initial date announced in 2019 had been June of this year.

This decision is part of Libras dialogue with the different regulators. “While our vision has always been for the Pound network to complement fiat currencies, not to compete with them, one of the crucial concerns that has been brought to our attention has been the potential for the Pound to interfere with the monetary sovereignty and monetary politics if the network reached a significant scale and a large volume of domestic payments were made in Pounds ”, they explain in the new document. “The Association has made changes to its initial focus, many of which come from the approach other blockchain projects have.”

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“This approach has the benefit of allowing the network to contribute to a more extensive use at home and provides a clear roadmap for integrating digital currencies from central banks (CNBDCs) as they become available, “the Association specifies in the new white paper. The initiative” will begin, initially, with some of the currencies mentioned in the multi-stablecoin basket: for example, the euro, the dollar, the pound sterling or the Singapore dollar. ” However, from the Association they clarify that this list of currencies is an example of those that could be joined, but that does not mean that they are specifically going for them.

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The Libra CEO affirms that each ‘stablecoin’, both multi-currency and individual, will be backed by the Reservation – the trick of “cash or cash equivalents and very short-term government bonds in that same currency” managed and monitored by the organization. As with the multi-currency stablecoin, this money bag is currently being fed by the members of the Association, but the goal is that when the project starts rolling, it is the cash deposited by the users themselves that contributes to the Liquidity reserve. This Reserve will be protected by a financial buffer, recalls the CEO.

This option will give maximum flexibility and control to central banks in monitoring how the pound system is developing in their countries.

“This option will give maximum flexibility and control to central banks in following how the pound system is developing in their countries and will provide a clear route to integrate digital currencies from central banks as they become available,” he said. added Perez.

In other words, Libra offers an alternative to its initiative for a global currency (hitherto seen as a transgressor by regulators) proposing a type of stablecoin already on the market and easier to control. The best known example of this type of asset is Tether, a dollar-backed cryptocurrency that has been tainted by some allegations of market manipulation. For example, a year ago, the New York Attorney’s Office alleged that Bitfinex, the parent company of iFinex and Tether Limited, secretly borrowed $ 850 million from Tether to cover losses – a charge the company denies. The controversy produced sharp declines in the cryptocurrency market. There are other examples of this type of asset: USD coin, Binance USD, True USD …

The possibility that Libra, after a year of strong reactions from regulators and the financial sector, would take this turn to lower its project to more limited terrain has been under consideration since late 2019. According to Reuters in September, director of Calibrates, David Marcus, argued at a banking seminar that the Association was open to alternatives such as “a multitude of different ‘stablecoins’ that represent national currencies in the form of digital currency.” Marcus also admitted that the launch was likely to be delayed, as they did not want to be fired until they got “the proper regulatory approval.”

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According to Perez, the changes announced this Thursday are the reason the one the release date is being delayed. The date announced by hype and cymbal a year ago was June 2020 – However, with the passing of the months, the leaders of the institution began to give signals in public statements or to the media that the launch would be later. For example, Perez himself said in a September interview with El Mundo that he estimated the launch would come in “the second half of the year.” However, in November, its director of ‘policy’ and communication, Dante Disparte, said in November 2019 to El Confidencial that June 2020 was still the target.

The delay in the date is not something that the Association is informing protocolically through official statements such as those of this Thursday. In fact, the general director of the project only clarified that, indeed, the planned date has been delayed “to the end of 2020” after being asked about it.

When asked if the coronavirus pandemic has slowed down the Association’s plans, the CEO limited himself to exemplifying the usefulness of the pound. “With the massive plans that governments have launched, we are dealing with an example of a situation where if there were large-scale stablecoins, that would greatly simplify the arrival of money for people, it would be almost instantaneous – and I’m not even advocating Libra specifically, I talk about the technology of stablecoins in general.

The role of Facebook

In the statement this Thursday, Libra also specifies that new members have joined the Association: the e-commerce firm Shopify and the digital asset broker Tagomi. These members arrive after a long list of departures in the second half of last year: Mastercard, Visa, PayPal, Mercado Pago …

In addition, the Association has also drafted five members who take “a leading role” on the committee: Anchorage, Bilson Trails, Calibra, Mercy Corps, and Union Square Ventures. Association members have been investing more money in the project to fuel operating expenses. Perez did not want to disclose amounts, but he did insist that Facebook accounted for less than 10% of the total investment. The bond of pound with the listed company founded by Mark Zuckerberg It has been one of the biggest reputational headaches of the project, to the point of having to appear last year the CEO of the social network, along with other leaders of the initiative, in front of the US Congress.

Libra is defined as an organization nonprofit, so members do not expect returns from all these investments. “We hope to be able to sustain our operations through the returns obtained through the part of the reserve invested in short-term bonds from respected governments,” says Perez. “Given the context of negative returns, we are also working on other sources of financing such as small commissions or other mechanisms ”.

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Other points that the Association has modified is the ‘permissionless system, it allowed a network relatively open to anyone who wanted to participate in forex blockchain technology. Libra stated that it would be a ‘permissioned’ currency at first but that it would eventually transition to a ‘permissionless model like that of cryptocurrencies. However, in this April’s update, Libra has decided to abandon that roadmap. “Regulators asked us thoughtful questions about the control perimeter of the pound network – in particular, about the need to protect it against participants who want to take over the system and remove provisions for ‘compliance,'” the Association explains in the new book. White.

Libra, based in Geneva, Switzerland, has also announced that it has already applied for a license as a means of payment system from the Swiss regulator, FINMA. According to the entity, the review of this process will also involve regulators and central banks from more than 20 countries, through FINMA’s ‘regulatory supervisory college’. Perez did not want to reveal which countries are in this group.

One of the issues that comes up when talking about the dynamics between pound and regulators is how something that seeks to innovate in the payment system can adhere to a well-established financial regulation. Does this dialogue with regulators aim to also innovate in legal matters? “FINMA and other regulators licenses are obviously designed for traditional payment systems, there will be parts of the regulatory framework that can be adapted to our model ”, says Perez. “However, that does not mean that we will not strictly comply with all the necessary requirements to operate – on the contrary, we will have financial and transparency guarantees just like any other platform.”


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