The Libra coin may finally launch early next year, but in a slimmed-down version. Which of the original promises will be kept with such a watered-down coin?
When the Libra Association first went public with its project, the coin was based on a broad basket of currencies. When governments, regulators, and central banks made abundantly clear that they were opposed to such a coin, the Geneva-based association reduced the reach to include several major currencies. Now, the launch seems imminent, but the coin will be based on the dollar only.
The association, which was founded by Facebook, plans to launch its coin at the beginning of 2021. The story was based on information provided by three people.
However, even this slimmed-down version of a Libra coin depends on the approval of Finma, the Swiss financial market regulator. Finma refused to comment on Libra’s plans. One can safely say that Finma won’t take any risks given the global attention paid to the plans of Libra.
The authorities have to ensure that coins such as Libra won’t make it easier for criminals to wash their ill-gotten gains. In other words, the project sponsors must make sure that they adhere to the same strict standards set by money-laundering laws as any other financial-service provider.
And, what’s more, the idea of a multinational coin may impact the ability of central banks to enforce their monetary policy. The latest version of a slimmed-down Libra may indeed allay such worries.
But of course, what is the purpose of a single-currency coin? The Libra was an attractive proposition because it promised an easy digital payment system for all: The Libra payment system is built on blockchain technology to enable the open, instant, and low-cost movement of money. People will be able to send, receive, and spend their money, enabling a more inclusive global financial system. Will a dollar-based Libra be of any use to a consumer in the euro-region for instance?
The private initiatives for digital currencies need to be seen in the context of state-sponsored projects. Some central banks have forcefully advanced their own projects for digital central bank currencies. Including the Swedish and Chinese, while the European Central Bank (ECB) recently made clear that it also aimed to speed up the process.
The Swiss National Bank (SNB) is also working on a digital currency in the context of the innovation hub with the Bank for International Settlements (BIS). This digital franc project will be presented on December 3, according to people familiar with the plan.