According to a Financial Times report, Facebook has announced that its digital currency, called Libra, (Diem) will be launched in January of next year. The currency was originally presented about a year ago but has had to undergo several iterations to ensure its chance at success.
The report stated that people associated with the development of Libra had confirmed plans to launch the currency solely on the back of the US dollar. The initial plan was that Libra would have the backing of a basket of fiat currencies, including the dollar and the euro. When that announcement was made, it gained the support of companies such as MasterCard, PayPal, and Visa. However, the Libra project has encountered several setbacks from regulatory concerns stirred by the project.
What Are The Concerns?
One of the concerns has to do with the Euro and the European Union’s monetary policy. Three months after the initial announcement was made, the ECB warned of the threat the Libra posed to both the euro and the EU’s monetary policy.
Yet, that is only one of the challenges that Facebook faced on its path to launching Libra. There are a whole range of other challenges and regulatory concerns that the Libra would have to overcome and satisfy if it was going to be launched successfully.
As a result, the company changed the project’s plans for Libra. Dropping the idea of being a Stablecoin backed by several global currencies and opting to be a digital currency to be used as a payment network. The plan also meant Libra would be linked solely to the local currency in which it is operating.
Upon its launch in January 2021, it would be solely supported by the US dollar. This is in an attempt to gain positive political and regulatory reactions. Still, it is a far cry from its original ambitious project.
Currently, the project is still awaiting the regulatory approval of the FINMA, or Swiss Financial Market Supervisory Authority, for it to function as a payment service. As a result, there has an exact date announced for Libra’s launch.
Does Libra Threaten The Existence And Use Of Bitcoin And Ethereum?
Upon its initial announcement that Libra was to be a Stablecoin, there were concerns regarding whether it would be a competitor for both Bitcoin and Ethereum. This is because, under the initial plans, it could become a dominant power.
If Libra had continued in its initial trajectory, it would have been a worthy competitor for both cryptocurrencies. However, under its current limited regulatory conditions, it’s not set to stand in the same class as Bitcoin and Ethereum.
One very significant reason behind the successes of Bitcoin and Ethereum is that they are not linked to any fiduciary coins. It seems like Libra, on the other hand, will become the US dollar’s version of a digital currency upon its launch. As a result, Libra will be affected by the same monetary policies affecting the dollar’s valuation. Bitcoin and Ethereum are not and therefore represent a greater sense of freedom.