Facebook may revamp its Libra digital currency to win over reluctant regulators
Facebook Inc. and its partners are considering redesigning the Libra cryptocurrency project so that the network accepts multiple coins, including those issued by central banks, in an effort to woo reluctant global regulators and rebuild momentum for the plan.
When Facebook unveiled Libra, it said it intended to create a single global digital currency. Anyone, especially the 1.7 billion people who have no bank account, could send money anywhere in the world at little cost, as easily as sending a text.
Eight months later, after the idea ran into a wall of opposition, Facebook and the Libra Assn., the consortium behind the digital currency, are looking at a revamp, said three people familiar with the matter. They are weighing a recast of Libra as mostly a payments network that could operate with multiple coins, two of the people said.
The coins could include those issued by central banks and backed by the U.S. dollar, the euro or other currencies, the people said. The association will reintroduce Libra soon, said the people, who asked not to be named because the redesign remains in flux and the plan could change.
The dream of a single global coin isn’t dead, said one of the people familiar with the overhaul. The new plan could expand, not pull back from, the original vision, that person said.
But if the revamped Libra becomes more of a payments network than a single, global cryptocurrency, the average U.S. consumer might not see much difference between Libra and existing payments systems run by PayPal Holdings Inc. or numerous fintech start-ups that aim to seamlessly move funds around the globe.
Facebook and the Libra Assn. declined to comment.
Facebook and 27 other companies announced Libra as a way to connect the globe — while also circumventing the financial system — and reduce the cost of sending money, especially for unbanked populations. The project’s members included Visa Inc., Mastercard Inc. and other large companies that would be Facebook’s partners in governing the system.
As originally envisioned, the Libra coin would be created from a basket of relatively stable assets, such as U.S. dollars and government bonds, euros, Singapore dollars, British pounds and Japanese yen. A Libra Reserve made up of those currencies and debt instruments would support the token, whose value would adjust along with the underlying assets’ market value.
But the plan almost immediately ran aground. U.S. lawmakers said they didn’t trust Facebook to manage a financial network after the company’s high-profile missteps in other areas, especially its repeated failures to protect user data.
Officials at some central banks said the new digital coin could undermine the sovereignty of their own currencies, while finance ministers worried that it could enable money laundering. Some European regulators vowed the project would never win approval.
As the Geneva-based Libra Assn. tried to formalize its membership in October, many of its most prominent members, including Visa and Mastercard, dropped out. The project now has 20 of the original 28 members, though it recently added two others — cloud-based commerce company Shopify Inc. and cryptocurrency trading platform Tagomi Trading.
Even as some left the project for dead, representatives of Facebook and the association have continued to meet with officials at the Treasury Department, the Securities and Exchange Commission and other U.S. regulators to address their criticisms, the people familiar with the matter said.
Treasury officials, in particular, have continued to focus on how the project will ensure the payments network isn’t used for money laundering, one of the people said.
Some people connected to the Libra project worry that the SEC could rule that a coin backed by a basket of currencies is a security, which is a tradeable financial asset like a stock or a bond. Such a determination would subject Libra to a slew of disclosure requirements and impose the same tight restrictions that the regulator places on stock offerings, which would undermine the coin’s usability.
The view from Sacramento
For reporting and exclusive analysis from bureau chief John Myers, get our California Politics newsletter.
You may occasionally receive promotional content from the Los Angeles Times.