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Abu Dhabi, UAEMonday 1 March 2021

Facebook to revamp Libra cryptocurrency project amid rising regulatory pressure

The new financial system is expanding its scope and will also offer multiple coins and digital versions of many government-backed currencies

Facebook said Libra would revolutionise the global payments system – giving a safe option of money transfer to huge unbanked population. Reuters
Facebook said Libra would revolutionise the global payments system – giving a safe option of money transfer to huge unbanked population. Reuters

Facebook is planning to redesign its Libra cryptocurrency project as its top supporters remain reluctant to lend public support in the face of mounting resistance from regulators, according to a report by a US digital media company.

The social media giant and its partners will make the project more “transparent and universal” in an attempt to assuage concerns that it could influence international monetary policy, The Information reported on Tuesday.

In addition to the proposed Libra token, the new financial system will now offer "multiple coins and digital versions of government-backed currencies" such as the US dollar and euro.

“Succumbing to pressure from regulators, Facebook has decided to offer its users digital versions of government-backed currencies and its proposed Libra token,” reported The Information.

However, the company still plans to launch Calibra digital wallet that would allow users to make purchases and send and receive money. The roll-out of this service will be delayed by few months, it added.

Originally slated for a June launch, Calibra will now come out in October and will support multiple currencies, of which Libra will be just one.

The initial roll-out of the wallet, which Facebook hopes to make available in WhatsApp and Messenger, could be restricted to certain countries based on the local currencies that it finally supports.

“Facebook’s new strategy could meet less resistance from financial regulators, who fear the social network’s influence over the direction of Libra,” said the report.

Reacting to reports that Facebook might completely drop Libra, the company said, “Facebook remains fully committed to the project."

“The Libra Association has not altered its goal of building a regulatory compliant global payment network,” said Dante Disparte, head of policy and communications for the Libra Association.

“The basic design principles that support that goal have not been changed nor has the potential for this network to foster future innovation,” he added.

Facebook’s move to offer digital versions of other currencies comes as countries begin discussing the digitisation of their own currencies.

In January, Christopher Giancarlo, the former chairman of the US Commodity Futures Trading Commission, pitched the Digital Dollar Project that aims to create a tokenised version of the dollar backed by the Federal Reserve.

The Fed's chairman Jerome Powell said that Libra “really lit a fire” under discussions about creating a digital dollar at a hearing on Capitol Hill last month.

China’s central bank is also working to create a digital currency that it plans to test soon in several cities, according to recent reports.

At the time of Libra's launch last June, Facebook said it would revolutionise the global payments system – giving a safe option of money transfer to those that are unbanked. The social media company estimates there are nearly 1.7 billion adults without a bank account or access to financial services globally.

However, almost two-thirds of them own an internet-connected mobile phone, which can facilitate access to these services, according to a 2017 World Bank report.

Facebook had earlier said it was looking at enrolling up to 100 companies in the venture and intends to release the currency in 12 countries in the first three months of 2020. The group, which initially received backing from payment giants such as Visa and Mastercard, aimed to raise as much as $1 billion (Dh3.67bn), with each participating company pledging an initial investment of $10 million.

But the project quickly ran into trouble with US officials and central bankers expressing concerns about the safety of the network. The regulators said it could potentially facilitate money laundering, terrorist financing and enable anti-competitive activity as the social media company gets into finance and the creation of "new coercive forms" of debt collection.

Some of the top supporters of Libra have backed away from the project due to mounting regulatory pressure. British telecommunications operator Vodafone left the Libra Association in January after seven members, including PayPal, Mastercard and eBay, withdrew from the digital currency project.

Updated: March 4, 2020 01:48 PM

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