Facebook is planning to roll out its Libra blockchain with digital equivalents of national currencies, according to a report in The Information. It is a change in strategy for the social media behemoth, which faced backlash from national governments after revealing plans to introduce a custom token, also called Libra, backed by a basket of currencies for transactions on its blockchain.
But the company has not yet given up on its earlier plan. According to The Information’s report, Facebook still plans to roll out the Libra token in the future.
However, the introduction of digital sovereign currencies on the social network’s blockchain could allay fears about the economic repercussions of its token. Those fears have ranged from Libra replacing national currencies as a medium of transaction in weak economies to its influence on monetary policy.
Facebook is also moving in lockstep with efforts by governments around the world to develop or test digital currencies. As such, it may also pave the way for introduction of its blockchain this October.
A Plan in the Making
Today’s report confirms a possibility that was first floated by Facebook CEO Mark Zuckerberg during his congressional testimony last year. He mentioned that “individual sovereign currencies” in digital form might make an appearance on their blockchain in the future. Facebook was also reported to be in “quiet talks” to join Centre, a consortium for stablecoins – digital assets with low to no volatility that are pegged to fiat currencies or assets.
But there are still several wrinkles to iron out for Facebook. The biggest one is the regulatory conundrum about its token’s status and value. Libra’s low volatility, which was intended to provide returns to Libra Association members, potentially classifies it as a security.
The volatility also creates problems for calculating a value for the token from its constituent basket of currencies. Facebook has already lost several vital members in recent months and scaled back the scope of its effort amidst hostility to its plans from several quarters.
The Information report also points out that digital equivalent of fiat currencies would make foreign transfers difficult because it involves conversion between different coins. For now, however, Facebook seems to be plugging on with its foray into the payment industry and Libra, the blockchain not the token, seems to be its lynchpin.