- Facebook will finally launch its cryptocurrency Libra in January 2021, but very different from the initial plan.
- Bitcoin and Ethereum will face a new competitor.
It was announced today that the long-awaited and controversial Facebook digital currency, Libra, will be launched in January 2021, according to a report published by the Financial Times. However, Libra has had to mutate from its original format, presented 1 year ago, in order to see the light of day. Thus, according to the Financial Times, three people associated with the Libra project confirmed that the Libra Association plans to launch it solely on the back of the US dollar.
Facebook announced its intention to join the crypto market by informing its plans to develop its own digital currency, called Libra, which would be backed by a basket of different fiat currencies, such as the dollar and the euro. In fact, at the beginning, companies such as Visa, PayPal and MasterCard supported the project. However, the path to success for Facebook was hampered by regulatory concerns introduced by the project.
Just three months after the announcement, the European Central Bank already warned that Libra could be a threat to the European Union’s monetary policy, as well as to the Euro itself. The challenges faced by Facebook together with the Libra Association make up a long list. Therefore, Libra was not going to see the light if they did not manage to calm the nerves of the regulators.
Thus, in April 2020, Libra changed its strategy and abandoned the idea of a token linked to a basket of global currencies. It would no longer be a Stablecoin but a digital currency intended to function as a payment network and which, moreover, would be linked exclusively to the local currency in which it operates. Libra will be solely supported by the US Dollar in January 2021.
The ambitions of the project have been reduced even further in order to have a positive regulatory and political reaction. Till today there is no precise date for the launch as regulatory approval from the Swiss Financial Market Supervisory Authority, or FINMA, is required to operate as a payment service.
Is Libra a threat to Bitcoin and Ethereum?
Certainly when Facebook’s plans to launch a Stablecoin that could easily rule the world were announced, the crypto market questioned whether it could be a worthy competitor for Bitcoin and Ethereum. Perhaps, under the original premises, Libra could have been a fierce competitor for Bitcoin and Ethereum. However, under the current limited conditions, Libra is not in the same category as the above mentioned cryptocurrencies.
Bitcoin and Ethereum have seen their success because they are not tied to fiduciary coins, these represent freedom. In the meantime, it appears that Libra will be the digital version of the US dollar and therefore monetary policies that affect the valuation of the dollar will also impact the digital currency.