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MIT Technology Review

Facebook’s digital currency project just got a lot less audacious

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Remember Libra, Facebook’s plan to create a global digital currency? Unveiled last June, it was immediately met with resistance from policymakers and central bankers around the world. So the team went back to the drawing board, and today it reemerged with a new vision—one that is a lot less audacious than the original. 

Here are the most substantial edits:

A whole new plan for the currency. The original vision was for Libra to be a stablecoin backed by a reserve of cash and low-risk government securities denominated in a mixture of selected fiat currencies: US dollars, euros, British pounds, Japanese yen, and Singapore dollars. The new Libra is … not that.

A key piece of feedback from regulators was “the potential for a multi-currency Libra coin to interfere with monetary sovereignty,” according to the updated Libra white paper. So there’s a new strategy: The Libra Association, the nonprofit that Facebook has stood up to manage the currency, will issue multiple stablecoins denominated in single currencies. There will still be a Libra coin, but it will be a “digital composite of some of the single-currency stablecoins available on the Libra network.”

A welcome mat for central banks. The new approach will create a “clear path for seamlessly integrating central bank digital currencies (CBDCs) as they become available,” according to the new white paper. It adds that if a central bank were to develop a digital representation of one of the currencies already on the network, the Libra Association could simply replace the single-currency stablecoin with the CBDC.

It’s even less of a “cryptocurrency” now. Few purists have ever seen Libra as a true cryptocurrency, despite the fact that it will use distributed ledger technology inspired by the kind that runs Bitcoin and other popular cryptocurrency networks. A signature characteristic of Bitcoin and its brethren is that they are “permissionless,” meaning that anyone with the right hardware can run the network’s shared software and contribute to the ongoing validation of new transactions. The validators in Libra’s network, on the other hand, will need to be vetted and given permission by the Libra Association.

In the original plan, this was only supposed to be the starting point. Libra’s creators pledged in their initial white paper to eventually transition the network to a permissionless structure. Now the association appears to have decided this approach is not going to fly with regulators. So it’s replacing the original plan with a new one aimed at creating a “market-driven open and competitive network,” Facebook’s blockchain chief, David Marcus, said on Twitter

Neither Marcus nor the new white paper spelled out what exactly that will mean. But it’s clear that in important ways Libra will not resemble what we usually call a “cryptocurrency.”