Banking News

Facebook’s Libra could host multiple digital currencies

libra

Yesterday Bloomberg reported that the digital currency project Libra is considering supporting multiple currencies, including central bank digital currencies (CBDCs). The project initially planned a stablecoin based on a basket of currencies. However, Facebook’s David Marcus raised the prospect of the Libra network hosting other currencies more than a month ago at the World Economic Forum.

We previously quoted Marcus at the event as saying: “I want to really make that distinction between the network and the assets that are running on top of the network, which I think could be issued by many different entities, whether it’s central banks or the private sector in some cases.”

He also stated: “For us, really what matters is to figure out what is the right network to host those stable coins or CBDCs.”

Bloomberg said people close to the project have two concerns. Firstly the focus of the U.S. Treasury on the potential use of the network for money laundering. And secondly, whether a stablecoin which represents a basket of currencies could be considered a security by regulators.

But it’s not just the U.S. the project has to worry about. Two weeks ago, the European Commission responded to members of parliament who asked whether Libra would be banned. Executive Vice-President Dombrovskis replied, acknowledging the same shift: “as Libra is still a project, and thereby a moving target, the information provided remains insufficient for determining the precise nature of Libra and, by extension, its relation with existing EU law. 

The project has lost several significant backers, including Visa, Mastercard, Paypal and Stripe. Many are thought to have withdrawn over concern about increased regulatory scrutiny. And the CEO of Mastercard recently made hard-hitting comments about the project.

However, there is an upside in the fact that most of the members are now startups. The latest addition was cryptocurrency broker Tagomi last week. Obstacles are nothing new to entrepreneurs, and there’s a willingness to try different approaches to achieve the goals of a widely usable cross border payments network. That’s what we’re seeing now.

We previously quoted Marcus at the event as saying: “I want to really make that distinction between the network and the assets that are running on top of the network, which I think could be issued by many different entities, whether it’s central banks or the private sector in some cases.”

He also stated: “For us, really what matters is to figure out what is the right network to host those stable coins or CBDCs.”

Bloomberg said people close to the project have two concerns. Firstly the focus of the U.S. Treasury on the potential use of the network for money laundering. And secondly, whether a stablecoin which represents a basket of currencies could be considered a security by regulators.

But it’s not just the U.S. the project has to worry about. Two weeks ago, the European Commission responded to members of parliament who asked whether Libra would be banned. Executive Vice-President Dombrovskis replied, acknowledging the same shift: “as Libra is still a project, and thereby a moving target, the information provided remains insufficient for determining the precise nature of Libra and, by extension, its relation with existing EU law.

The project has lost several significant backers, including Visa, Mastercard, Paypal and Stripe. Many are thought to have withdrawn over concern about increased regulatory scrutiny. And the CEO of Mastercard recently made some hard-hitting comments about the project.

However, there is an upside in the fact that most of the members are now startups. The latest addition was cryptocurrency broker Tagomi. Obstacles are nothing new to entrepreneurs, and there’s a willingness to try different approaches to achieve the goals of a widely usable cross border payments network. That’s what we’re seeing now.