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Facebook Brings Serious Regulations to Libra Coin
April 24, 2020
You remember the vision of Libra Facebook created in June last year to promote financial inclusion. Libra coin will work on a blockchain but came before us as a digital currency completely away from Bitcoin. While everyone had a chance to manage a node in Bitcoin, Libra was more centralized and could only be managed by the servers of Libra Union members. Since it did not seem sincere for a large company to support a project that would help avoid other big companies while guiding those who could not reach its banking activities, most of the companies that provided support initially announced the decision to leave the platform. There was controversy that this initiative of Facebook, which also disturbs the big states, would destabilize the central banks' monetary policies and nevertheless make money laundering easier. In fact, US President Donald Trump said that Libra coin, which is supported by giant companies such as Visa, MasterCard, and Uber, does not give confidence, "If Facebook wants to do banking, it should be subject to the same banking regulations as other national and international banks." The team brought the new Libra to the agenda with a different and less bold approach than the original, due to the considerable loss of members and the resistance of the central bankers.
In the original version of the plan, it would come to our mix as a stablecoin (fixed currency) backed by low-risk government bonds called Libra cash reserve and a mix of selected currencies (like USD, EUR, GBP, YEN). But the new Libra is not exactly like that. According to the updated Libra report, the key part of the feedback from regulators was "the potential of multi-currency Libra coin to interfere with monetary domination". According to the arrangement, Libra Union will create more than one stablecoin in one currency instead of a single stablecoin containing different currencies. In other words, it will be composed of different currencies, but will not contain all of them at the same time, and many different currencies will be obtained by using each one individually. Of course, these will also be referred to as Libra coins and will be seen as “digital combination of fixed single currencies in the Libra network”. According to the official report on this issue, the biggest advantage of the new approach is that it will show a comfortable way to seamlessly integrate the central bank digital currencies (CBDC / Central Bank Digital Currency / Central Bank Digital Currencies) when it is released. If the central bank wants to improve the digital representation of one of the currencies available on the network, it can be exchanged using the money offered by the Libra Union as the only stablecoin.
It was already a matter of debate whether Libra coin could be called cryptocurrency. Although Libra's execution by collective work by members of the union was in line with blockchain ethics, its control by giant companies created question marks in terms of a clear stance under pressure. According to the original plan, the Libra coin organizers promised in their first promotional reports that they would eventually edit the network so that they could be used without permission, that is, without permission from member servers of the Libra Union. But according to the latest regulations, this becomes even more impossible. Facebook's blockchain chief David Marcus said in a statement on Twitter that they have replaced the original plan with a "market-oriented open and competitive network". Neither David Marcus nor the new reports provide any explanation for what exactly this means. But at least it has become clear that Libra cannot be called cryptocurrency with these new changes.