Libra 2.0 – From Global Currency to a Payment Method on Facebook’s Platform
After Libra, Facebook’s ambitious global digital currency venture, faced fierce resistance from regulators around the world, Facebook has announced “Libra 2.0”. The venture is set to undergo far-reaching changes that, on the one hand, will likely do away with regulatory concerns, but, on the other, will force Facebook to give up its original vision, i.e. a quick and simple transfer of digital currencies between accepted users worldwide without the need for a bank account.
The Calibra currency was designed to be a stable coin-backed currency basket that maintains a permanent value and allows access to financial services without traditional intermediaries. Such a currency, to be offered to the billions of users of Facebook’s various platforms, with the support of giant corporations backing the project alongside Facebook, threatened to create an overriding alternative to the dollar and the global payment system.
Libra 2.0 gives up this vision in several respects. As part of the changes, the focus will be on creating a more traditional payment network that allows the use of cryptocurrencies (called stablecoins) linked to national currencies, such as the dollar or euro (fiat currency), rather than a sole digital currency.
In addition, the Libra blockchain network will not be “permissionless,” where anyone can participate in the network without a single central controlling authority, like in the bitcoin network. Instead, one single central controlling authority will be responsible for checking and monitoring the wallets of network users and overseeing transfers within the network. This last concession is intended to stave off criticism that Libra also attracts criminal parties and is a fertile ground for money laundering.
Libra has shifted gears to a closed system, in which only approved partners can build infrastructure, such as wallets, for the currencies. In addition, to ensure regulatory approval, Libra is working with a number of regulators from over 20 countries.
Although Libra seems less revolutionary now, it still challenges the traditional payment system and the idea of financial sovereignty by combining cryptocurrencies with traditional currencies, thus facilitating a more seamless conversion between them.