After a rocky road with the United States Securities and Exchange Commission, key decision-makers at Libra have gone back to the drawing board to re-tool their cryptocurrency platform to be more palatable to regulators.
First of all, Libra has applied for a payment system license from Swiss regulator FINMA (Swiss Financial Markets Supervisory Authority). This is a huge milestone on the way to some publicly usable Libra payments system, but there is still work to be done. Libra’s licensing process will continue to require input from other central banks and financial regulatory authorities around the world. But the traction is positive for now — Libra is on its way to being able to offer monetary and banking services.
There are also a number of underlying technical changes taking place. First, Libra’s multi-currency stablecoin LBR will be backed by new stablecoins, instead of by fiat currencies living in a bank account somewhere. Libra co-creator David Marcus tweeted that “the most notable evolutions” are “the creation of single currency stablecoins,” like USD, EUR, and GBP, in addition to the Libra coin.
This updated design is made possible by a smart contract that ties together the fixed nominal weights of underlying stablecoins. It also happens to limit Libra’s flexibility, since adding or removing a currency from the basket would require issuing or retiring another digital token.
The second major update is to the Libra white paper, which has been retooled in light of the previously described technical changes. The first version described Libra as a permissioned network controlled by the Libra Association, and the plan was for it to go permissionless in the next five years.
But the revised white paper outlines a more compliant roadmap for Libra’s future, limiting what people can do on the network. Unhosted wallets will be subject to balance and transaction limits, for example, and the network will only be accessible to regulated crypto companies at the start.
Where Libra was previously stuck in regulatory purgatory, the gears appear to be turning more methodically lately.