Facebook’s Cryptocurrency Libra in the Limelight Again

Nov 30, 2020

According to a report published by the Financial Times, Libra – the cryptocurrency spearheaded by Facebook – will be launching as early as January 2021, albeit on a smaller scale than initially planned. 

The Libra Association was formally introduced on June 18, 2019, and has had its fair share of ups and downs since. From partners bolting to regulatory interrogations, privacy concerns, and many more, we can’t say it’s been easy for them. 

From its inception, Libra was meant to be backed by a basket of currencies and securities. This isn’t surprising to anyone who remembers the USD being backed by gold until 1971.  

All around the world, the notion was met with backlash from central banks and politicians. Everyone warned that Libra could pose risks to global financial stability and monetary policies. The G7 vowed to pushback until regulations and proper oversight are in place. Ultimately, Mark Zuckerberg was forced to delay the timeline of Libra’s project until those concerns can be addressed.  

The initial plan of rolling out digital versions of several traditional currencies in April 2020 was scrapped for launching a single coin backed by the USD (stablecoin) in January 2021, with other currencies to follow later.  

Stablecoins are cryptocurrencies backed by the value of an underlying asset such as a fiat currency. Unlike a wildly fluctuating cryptocurrency such as Bitcoin, stablecoins would have price stability. For instance, a single unit of USD-backed stablecoin will always be worth 1 USD. Ultimately, volatile cryptocurrencies like Bitcoin are excellent for investments but could prove slightly difficult for everyday payments. 

Facebook will now launch a single dollar-backed coin that will directly compete with Circle (USDC) or Tether (USDT). This launch is yet highly contingent on regulatory approval.  

Much like other similar products, Libra is a cryptocurrency with a digital ledger known as the blockchain. It’s disclosed goal is to empower 1.7 billion unbanked to use the digital currency and propel the economy into a digital one.  

Besides launching an independent app that will be able to receive and send Libra coins, the idea was for Facebook to launch its own Libra wallet simultaneously. Facebook’s subsidiary Calibra was upgraded and rebranded in May. It is now called Novi, and its account will be available through WhatsApp and Messenger apps. Facebook counts on people to start using Novi for remittance purposes and peer-to-peer payments, a useful tool for Facebook’s Marketplace. 

Here are Libra’s benefits as listed on their website. 

  • Easy- Access through digital devices 
  • Backed by a fiat currency or a security 
  • Quick Transactions 
  • Global Interconnectivity 
  • Blockchain Security 
  • Open-Source Protocol 

Facebook initially established the Libra Association to oversee the currency. It consisted of companies from various spheres that would collectively work to introduce the cryptocurrency, Libra, and get it approved by all the regulatory bodies. The members included giants like Lyft, Spotify, Uber, Thrive Capital, Coinbase, Visa, Vodafone, and many more. By now, some of them, like Visa and Booking Holdings, have bolted, but that still leaves plenty of members who are committed to seeing the project launch. 

It is unclear whether the members of the Libra Association have intentions to launch their own Libra-based service. It is clear, though, that ever since news of Libra’s January launch hit the headlines, Facebook’s stock climbed. According to CNBC, Wall Street analysts have been bullish on the announcement, saying the cryptocurrency could revolutionize Facebook’s digital businesses.