Facebook dials back Libra, will issue separate USD, euro stablecoins first
Libra's original design has complexities that straightforward stablecoins don't.
Facebook has succumbed to regulatory pressure and has dialled back its Libra cryptocurrency plans, according to The Information, citing "three people familiar with the matter."
While Libra has not yet confirmed the news, The Information was the first to correctly report – weeks before Libra was revealed – that the coin would be managed by a separate governing council, so make of that what you will.
Multiple stablecoins
Reportedly, the Libra Association will continue working on the original design of Libra, in the form of the stablecoin that's pegged to a basket of currencies. But Facebook itself is backing away from Libra, and before Libra has a chance to hit the market Facebook will release stablecoins pegged to individual fiat currencies, including the US dollar and the euro.
The Calibra wallet is still going ahead, although its release date has been pushed back from June to October. The wallet will support those stablecoins, although use might be restricted in certain locations depending on the coins being used.
Under pressures
Regulatory pressure is reportedly one of the reasons for the decision, but there may have been other pressures at play too.
With 10-year government bond yields from Japan and most of the Eurozone now in negative territory, and US bond yields similarly creeping downwards, it's possible that Libra just wasn't going to work as intended.
The idea was to create a sustainable system where Libra could live off the earnings of its stablecoin collateral, while offering instant near-free transfers in a uniquely stable digital currency anywhere in the world, but a rapidly changing global economy may have scared off Libra Association members just as surely as regulatory pressures did.
The new, much simpler and more direct "Facebucks" might be a much simpler undertaking.
And it's not like Facebook can't afford it to collateralise a plain old stablecoin. Facebook's cash on hand increased 33% from the end of 2018 to the end of 2019. At the end of last year, Facebook was sitting on a $55 billion hoard.
By contrast, the Tether (USDT) market cap is less than $5 billion.
Cash on hand can be defined as cash deposits at financial institutions that can be immediately withdrawn, or highly liquid cash equivalent investments maturing in one year or less. Might as well just issue a stablecoin and get into payments if you're not doing anything else with all that money.
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Disclosure: The author holds BNB, BTC at the time of writing.
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