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Facebook changes its Libra cryptocurrency to please regulators

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Facebook has announced changes to its Libra cryptocurrency that are designed to bring regulators onside after a tough six months for the project.

First announced in June 2019, Facebook's Libra platform was designed to encourage more online financial transactions, especially among people who do not have bank accounts.

However, by October, a swathe of major partners had pulled out of the launch phase of Libra, including Mastercard, Visa, eBay, Stripe and Mercado Pago. Mastercard later clarified its decision, saying that it had concerns about the project’s business model and issues surrounding compliance.

Announcing changes yesterday as part of a major revamp, Facebook said the digital currency will now be linked to individual national currencies and will be overseen by global regulators.

Libra’s governing body, the Libra Association, said it will now offer “stablecoins” backed by single national currencies, as well as a redesigned token based on these currency-pegged coins.

Originally, the cryptocurrency was intended to be backed by a wide mixture of currencies and government debt. Central banks and regulators feared that this approach could destabilise monetary policy, facilitate money laundering and erode users' privacy, with some threatening to block it.

The Libra Association said it has “worked closely with regulators, central bankers, elected officials and various stakeholders” to shape the currency.

In a blog post, Libra developer Michael Engle said: “We have made changes to our initial approach, many of which depart from the approaches taken by other blockchain projects.

“Our goal was never to emulate other systems, but rather to leverage the innovative approach of using distributed governance and distributed technology to create an open and trustworthy system.

“We appreciate the discussions with policymakers around the world who have helped us understand key concerns so that we can integrate actionable improvements into the Libra payment system’s design and into a phased rollout plan.”

The Libra Association, which will issue the coin and govern its network, said a group of central banks, watchdogs and agencies set up by Swiss regulator FINMA will oversee its efforts to become a licensed payment service provider in Switzerland.

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