T Skevington and M Bacina
Libra Association amends whitepaper: controversial changes or sensible simplification?
Since its initial announcement in June 2019, the Libra Association has been hammered by international governments and regulators about concerns over the initial proposal and seen partners threatened if they did not leave the association. In a bid to address some of those concerns, the Libra Association has today published an amended white paper, detailing fundamental changes to the structure of the Libra project.
The two key changes, summarised in Libra's white paper cover letter, are:
Libra will be offering single-currency stablecoins in addition to the original multi-currency coin (rumoured for the last six weeks); and
abandoning the (already tenuous) future transition to a permissionless system.
The introduction of single-currency stablecoins is a direct response to the oft-repeated concern that the original Libra Coin (≋LBR) was designed to interfere with monetary sovereignty and monetary policy. To address this concern, Libra will initially add some major currencies (e.g., LibraUSD or ≋USD, LibraEUR or ≋EUR, LibraGBP or ≋GBP, LibraSGD or ≋SGD), to be followed by others in future.
Libra has emphasised however that:
≋LBR will not be a separate digital asset from the single-currency stablecoins ... ≋LBR will simply be a digital composite of some of the single-currency stablecoins available on the Libra network.
The much more controversial change to those embracing a decentarlised future will no doubt be the abandonment of the long-term plan to transition into a permissionless payment system. While this change has likely been made in response to regulator concerns that unknown participants of the network could theoretically take control and "remove key compliance provisions", it does little to address widespread concerns that the Libra Association will be no different any other conventional centralised financial services entity with the same central points of potential failure and fraud (but only perhaps).
While some of these changes have been expected, Libra may well find itself jumping out of the frying pan and into the fire. Many of the changes are likely to only further engrage both privacy advocates and libertarian minded decentralisation advocates alike. It also remains to be seen whether the changes will enable a smoother path to international regulatory approval, which process has commenced with a licence application to the SWISS regulator FINMA, discussed further here.
On the other hand, a blockchain/distributed ledger powered payments system with true global reach may provide an important first test of this relatively new technology, and could leapfrog other consortia based payment systems and central bank digital currency projects entirely.