According to the “Financial Times” report, the digital currency project Libra (“Libra”) led by social media giant Facebook is ready to be launched early next year and will be released as early as January 2021.
Three people familiar with the matter who participated in the project said that this release is a “limited version” of Libra, and related functions may be restricted.
1. Libra breaks the game
The Libra digital currency project was conceived in 2018. In June 2019, Facebook officially announced the Libra project and released a white paper. Initially, Facebook’s goal of launching Libra was to “build a simple, borderless currency and a financial infrastructure that serves billions of people.” In short, it wanted to create a single global currency with multiple legal instruments. Support such as currency and government bonds.
However, since it was first announced last year, the Libra project has been questioned and hindered by governments, central banks and other legislative and regulatory agencies, who believe that Libra may threaten the status of legal tender and threaten financial stability and security.
As a result, the Libra project originally scheduled to be launched in June 2020 was interrupted and postponed under the resistance of regulatory review. In addition, payment processors PayPal, Mastercard and Stripe and other members of the Libra Association have also withdrawn.
Libra is struggling to “survive” and has to find a “compromise” solution.
On April 16th of this year, Libra released version 2.0 of the white paper, decided to change the route of Libra, and began to study a stable currency solution based on a single currency.
In the new version of the white paper, Libra has made four key changes: 1. In addition to providing currencies anchored to a basket of fiat currencies, it will also provide stable currencies that anchor a single fiat currency; 2. Through a strong compliance framework Improve the security of the Libra payment system; 3. Give up the future transition to a permissionless system, while maintaining its main economic attributes; 4. Establish strong protection measures for Libra’s asset reserves.
This means that Facebook has reduced the scale of its vision to a certain extent.
2. How does the “limited edition” Libra advance?
So, what does the so-called “Limited” (limited version) Libra mean this time?
One of the people familiar with the Libra project stated that the Libra Association will initially only issue a single anchor currency Libra linked to the U.S. dollar. After fully complying with the requirements of laws and regulations, Libra linked to other legal currencies will be launched later.
This means that the Libra issued this time will be supported on a one-to-one basis in U.S. dollars, similar to how stable currencies such as USDC and GUSD are regulated in the cryptocurrency market today.
The three sources also said that the “limited version” of Libra is awaiting approval from the Swiss Financial Market Supervisory Authority and is expected to be approved in early January 2021. After approval, Libra will be able to operate as a payment service in the market.
Why is the Swiss Financial Market Supervisory Authority? Because Libra is headquartered in Switzerland, and according to the latest report, the Libra Association recently hired Credit Suisse and UBS senior lawyer Saumya Bhavsar as the general counsel of its payment business Libra Networks. Saumya Bhavsar had also previously Worked in the U.S. Department of the Treasury OCC (Office of the Comptroller of Currency), responsible for overseeing the National Bank and the Federal Reserve Association. Therefore, Libra’s approval is basically guaranteed.
At the same time, the report also stated that some members of Libra, such as the music service Spotify and the ride-hailing app Uber, may use Libra currency as a payment method for their respective platforms, but the overall response after the launch of Libra must first be waited.
Earlier, PayPal, one of the original members of Libra, recently launched its own cryptocurrency trading service, which aroused enthusiastic responses. While Libra chose to issue its own stablecoin, the “ambitious” limited version of Libra was ready to go and became the focus of everyone’s attention.
3. Subvert the stablecoin or ignite the crypto market?
According to the plan of the Libra Association, after the single currency Libra stable currency is launched in January 2021, will it change the stable currency pattern in the crypto market? What impact will it have on the status of traditional legal tender?
First of all, Libra will first launch a 1:1 stable currency anchored to the US dollar, so it will be in a competitive position with stable currencies such as USDT and USDC. With the endorsement of the Facebook giant, nearly 2.5 billion monthly active users, and regulatory approval, will Libra be quickly accepted by the market, subverting the current pattern of stablecoins?
The founder of Lebit Mining Pool, Jiang Zhuoer, had previously expressed his views on Libra stablecoin on Weibo. “The death knell for USDT has sounded. Libra≋ U.S. dollar” will easily defeat USDT’s scale advantage. Once USDT usage begins to decline, Tether The problem of insufficient reserves will be exposed, and a run will inevitably occur. One day in the future, I don’t know how many people will lose their fortunes because of the USDT thunder. “
USDT is currently the most widely accepted US dollar stable currency in the crypto market, and it also occupies more than 80% of the stable currency market. However, USDT has repeatedly reported thunder problems such as insufficient reserves. Therefore, once the Libra USD stablecoin becomes a new reliable choice, the threat to USDT’s status is bound to exist.
Secondly, as a major deployment of the technology giant in the encryption field, will Libra have any impact on the encryption market?
Blockchain and encrypted digital asset researcher Gu Yanxi published a column on November 30, stating that among various application scenarios of Libra stablecoin, encrypted digital currency trading is a major application scenario. The influx of a large amount of funds has provided the basis for the growth of encrypted digital currency prices. Among various encrypted digital currencies, Bitcoin is still generally recognized, so the price of Bitcoin has better conditions for growth.
In addition, Libra may have an impact on the global currency system and promote the production of more digital currencies. Since Libra is pegged to the U.S. dollar on a one-to-one basis, it may continue to expand the influence of the U.S. dollar on a global scale. After the Libra stablecoin is introduced to the market, central banks of various countries will inevitably speed up the research and development of digital currencies. After major technology and financial companies may see the feasibility of such financial products, they will consider their own blockchain layout strategies.
