After months of backlash and negotiation, Facebook is considering making major changes to its Libra cryptocurrency project.
Initially, the social network intended to position Libra as a global digital coin that could be exchanged through its Calibra online wallet. However, in the face of significant worldwide regulatory scrutiny and significant partner departures, Facebook is now contemplating revamping its banking products.
Facebook’s Libra Changes
The Information reports Facebook plans to let users exchange a range of digitized national currencies through Calibra. As such, consumers could use the platform as a PayPal-style online payment and money transfer utility. That said, the firm still wants to release Libra alongside its digital wallet. However, with other, more familiar options available, the public may not glom on the new cryptocurrency as expected.
Conversely, Facebook’s financial services product might face less regulatory resistance if not presented as a worldwide currency disruptor. The change could also help the Big Tech giant secure more backers for its ambitious banking project. At launch, the Libra Association had 28 pledged members from across the fintech and technology sectors. Since then, the group has lost eight members, including Mastercard, PayPal, and Visa.
The social network’s plans to offer digital versions of various regional currencies present another issue. The corporation pitched its cryptocurrency as a way for 1.7 billion people without bank accounts to spend and transfer money seamlessly. But as a payment network, Libra would require users to understand aspects of international monetary conversion rates.
The Libra Association would also need to secure regulatory approval for each region in which it operates its financial offerings. For instance, U.S. officials have questioned whether Facebook’s digital coin, which would be backed by a basket of currencies, is a security or trade fund. If so, it would be subject to restrictive federal rules and disclosure requirements.
Furthermore, The Information notes the sheer scale of the Libra project might necessitate the composition of new finance laws. Indeed, Calibra would be interoperable with Facebook’s apps, which have a combined user base of 2.37 billion people. The publication spoke to congressional officials who believe Washington could add a new regulation layer to manage the cryptocurrency.
The Threat of Competition in Currencies
Facebook’s Libra project also faces another issue in the form of competition from private and public sector sources.
Bloomberg reports the Bank of England and the European Central Bank are interested in developing their own digital coins. Similarly, U.S. Federal Reserve Chairman Jerome Powell said Libra prompted renewed interest in developing a tokenized digital dollar. Under Facebook’s revised plans, Calibra would support those offerings. But the deployment of central bank-backed cryptocurrencies could dampen the public’s enthusiasm for the social network’s core financial product.
Besides, the global fintech industry has experienced an extraordinary amount of growth in the last few years. Indeed, the Business Research Company reports the market, valued at $127.66 billion in 2018, will be worth $309.98 billion by 2022. Moreover, investors, venture capital firms, and corporations are well aware of which way the wind is blowing.
This year, The Burn-In has covered the remarkable fundraising achievements of fintech firms from around the world.
In January, French startup Lydia secured $45 million in capital and Lagos-based company Flutterwave landed a $35 million in outside investments. Moreover, in February, Boston’s Flywire locked down $120 million in Series E funding while the U.K. concern Revolut had a $500 million round.
As such, Libra will be walking into a much more competitive fintech space at launch. Nevertheless, Facebook is undaunted and will reportedly deploy Calibra and its digital coin this October.